Sunday, August 03, 2008

long term market trend

( click on the image to enlarge it.)

A stock chart of an index , like s&p500 , can be used to determine when a major bull market starts and when it ends. As you can see in the chart , it started in 2003 may-june and ended in 2008 January.

In a capitalistic economy, after a cycle of economic growth we have to shed the excesses to start anew (in this cycle the excess is housing&banking , last cycle it was technology, in the next cycle it might be Energy) . This shedding of excesses could take some time depending on the magnitude of it. Stock Market usually turns up way before the economy turns. Actually it turns up when people have no interest in buying stocks due to the gloomy economy at that time period.

But charting can be used to determine when the economy is going to turn and to start buying stocks. This method could be used to allocate your long-term investments.

In the picture above i've identified some markers which could be used to identify the next turn. Any free charting website could provide you this information.

Hope i use this the next time it turns around.

1 comment:

Pradeep said...

What funds and stocks should we put our money at this time?

What signs do we look for when stock market is going to make an up tick?