Forum Archive Index - December 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Phaedrus,

>
>You don't think that the "Crash of '87" was a one day event
>do you? It wasn't. The market fell for about 5 months.
> 
>The trendline break gave good warning of significant weakness. The
>market then closed at around the same level for FOUR consecutive
>trading days (circled) - anyone heeding the warning had plenty of
>time to act. 
> 
>You say that "TA would not have saved you, at least in a predictive
>sense". How about in a financial sense? The market went on to HALVE
>from this point!
>
>

Maybe, but there was no TeNZ or any other index fund listed in 
those days, so it wasn't possible to sell "the market" in response to 
the index dive.

As Nick McGaw said
"Its worth mentioning that the index has very little
bearing on individual trading decisions."

Now take the case of 'today'.

Our friends at 'fairshare' are recommending getting out of all shares 
except for gold shares.  Since they made that recommendation the NZSE 
has fallen.  But my own NZSE portfolio has made significant gains 
since the 'sell' recommendation.   Worse for fairshare, the 
specific share that fairshare suggested be sold (SKC) has put on 5% 
within a month, as Gerry has highlighted for us today.  

Personally, I ignore all indicies, as I don't invest in anything 
purporting to follow any index. 


>
> 
>I see this as an example of TA working well, not as a failure at
> all. Do you know of a system that gave better warning than this?
>
>

Yes.  Fundamentals.  All you had to do was ask yourself why 
certain NZ companies were worth significantly more in terms of P/E 
ratio and had significantly lower dividend yields than their overseas 
counterparts. 

That was warning enough that the 1987 bull run was a bubble. 

SNOOPY

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