Go Buy Them Shoes!

May 14th, 2020

Is anyone else getting fed up with the sheer number of COVID-19 updates bombarding the senses from every quarter or is it just me?? Not sure if I’m just imagining this but it almost seems that even where there isn’t a CV-19 story, it’s still somehow being linked…….

Headline – “……..CORONAVIRUS CAUSES MAN TO SPONTANEOUSLY SELF COMBUST WHILE SELF ISOLATING IN THE HIMALAYAS…..” is that even possible?

Anyway now that I have your attention, just a real quick market update which was inspired by a discussion I had yesterday with a client.

Q. Where is the market now, where do you see it going and how much potential risk is currently present? (this is a great question, especially the last part. Thanks Craig)

A. So if you cast your eyes down a bit you’ll find a chart of the XJO which is the Aussie 200.

Following our dramatic abseil off the proverbial cliff we saw an overreaction in the market (1) to the unprecedented events unfolding around us. This happens almost without exception in any market selloff. Typically following a significant market selloff we also see (again, almost without exception) the reactionary bounce (2) as the market absorbs what’s happening. In this case the stimulus measures. As the market begins to work out and price in both good news and bad, it starts to create a trading channel (3) and will move sideways within that channel with ever decreasing ranges of high’s and low’s. This will create a convergence point (5) at some point in the future from where we are today (4) and it’s from this convergence point that we could potentially see a breakout of the market in either direction. Up if there are no problems or issues facing the market that it hasn’t already priced in or down if we receive a further shock…..such as a 2nd wave of infections. This brings us to (6) the potential risk.

The downside could be as much as 500 points. But this isn’t the point. The point is that the market could just as easily go up as down. If the downside risk is 500 points and the upside potential is say our previous high for example, the risk of not being in the market to take advantage of the upside is far greater than the potential short term risk of 500 points, if you get my point.

Hmmmm….. if only it was that easy I hear you say!! And you’d be right. Emotion plays a huge part in everything and so does time so nothing is certain. If your looking for the bounce then now is as good a time as ever. Maybe not the bottom but close enough to it to still make good coin. If your looking for the long haul then now is as good a time as ever. Maybe not the bottom but close enough to still make good coin.

My point is, those really expensive shoes you’ve been waiting to buy are on sale right now, so go buy ‘em. If you wait for the sellout stock (no pun intended) to get cheaper you might just miss out on a bargain.

As always, if you’d like to discuss any aspect of this further just give me a shout.

Footnote – I understand that NSW clubs and pubs that have restaurants and café’s attached can now open to serve 10 patrons at a time with drinks delivered as table service. Seriously, you guys rock!!! Just one thing though…..how are you going to get rid of the first 10 people that turn up? Contact us if you want financial consultant services gold coast