An August Reflection
September 2nd 2007 06:17
August ended with the markets finishing higher, in the midst of a severe volatility dictated by emotions and sentiments swinging like a pendulum clock. The ASX S&P 200 benchmark index closed nearly 2% higher to 6247.2 points on the back of positive performance in the energy, mining and banking sectors.
Some experts believe that optimism has return but added the caution of extreme sentiment play, under the influence of US debt fallout. Who is bored of the story? Hands up, please.
No doubt, it is indeed boring and that the issue has tipped the point of being a guessing game of what is the exact consequences of the credit crunch. No one really knows.
Yet we don't give up trying to predict the next phase of the markets with some using advanced modelling techniques, historical data analysis, or simply naive gauging of current investors' sentiments. The results of the attempts are mixed, which is part and parcel of the function and characteristic of a liquid and active market.
A month has passed since the markets plunged and so far we have seen that whenever the markets turned positive, views of 'optimism and/or recovery has arrived' were dished out, and when the very next day the markets dived, the views reversed completely.
'Smart' investors will ignore such views and would take his time to filter out news and information to find quality ones. But, of course, such 'smart' investors usually hold long term views and current volatility does not concern them much.
It is always good to see a positive market such as the one on Friday but history tells us to be prudent. In momentum strategy studies, positive performance in one month will usually result the same performance the next month, holding all factors constant. The same pattern is seen for negative performance. And so how was last month's performance? You should know.
Despite last Friday's feel good atmosphere, there are some smells of a possible 'recession' coming out from the overcooked credit crunch issue, as some have sniffed.
Some experts believe that optimism has return but added the caution of extreme sentiment play, under the influence of US debt fallout. Who is bored of the story? Hands up, please.
No doubt, it is indeed boring and that the issue has tipped the point of being a guessing game of what is the exact consequences of the credit crunch. No one really knows.
Yet we don't give up trying to predict the next phase of the markets with some using advanced modelling techniques, historical data analysis, or simply naive gauging of current investors' sentiments. The results of the attempts are mixed, which is part and parcel of the function and characteristic of a liquid and active market.
A month has passed since the markets plunged and so far we have seen that whenever the markets turned positive, views of 'optimism and/or recovery has arrived' were dished out, and when the very next day the markets dived, the views reversed completely.
'Smart' investors will ignore such views and would take his time to filter out news and information to find quality ones. But, of course, such 'smart' investors usually hold long term views and current volatility does not concern them much.
It is always good to see a positive market such as the one on Friday but history tells us to be prudent. In momentum strategy studies, positive performance in one month will usually result the same performance the next month, holding all factors constant. The same pattern is seen for negative performance. And so how was last month's performance? You should know.
Despite last Friday's feel good atmosphere, there are some smells of a possible 'recession' coming out from the overcooked credit crunch issue, as some have sniffed.
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