The madness of crowds

There is nothing magical about round numbers. But we all got very excited when the millennium came (and went). But think about it for a moment. That date was the 2000th anniversary of what? The guessed birth or conception date of the founder of  a religion whose nominal adherents represent less than a third of the world's population. In those two thousand years the calendar has been changed more than once and within the population of adherents there are disagreement about when crucial events occurred. The actual day means nothing. So why so significant?  We (I speak of a collective we driven in our enthusiasms by media pundits) get very excited by these numbers with all their zeros. Next year another frenzy will be unleashed as we are whipped up to recall that 100 years ago the First World War began and millions stood on the brink of their demise as they faced the guns.

I've more than made my point, forgive me. Yesterday the DOW broke through 16000 and the S&P broke through 1800 for the first time. Significant? Of course it is because the crowd has been looking for an excuse to bring the extraordinary bull run to an end. Here was an ideal opportunity. Prices lifted their way through the magic number and the sellers began to emerge. Will this be the end of the run? I don't know but I doubt it. The governments' newly printed money still holds sway.

But it is important to remain vigilant.

There was a nasty chart pattern was in the DOW. The sharp top to that final candle and the horrid pull back. suggests that this could signal something big. The S&P does not look so bad. On the plus side there is the fact that the market recovered in the last few minutes of trading and the modest volume of trade.

My Chinese shares were doing well until late in the evening when they suffered a big switch. Because it costs very little to go out and back in I am contemplating doing that to protect my profits and waiting for the dust to settle.

I sold my UK shares this morning. Their performance since I bought them on 25th October has been miserable. I leave them with no sense of regret. My timing for buying US shares in my ISA was poor, given what happened yesterday, but throwing in the towel may also be on the cards.

But I do have a new plan. It appears that shares on the Hong Kong market are mostly eligible for ISA investment. That's where my UK money is going eventually once it becomes clearer what the market is poised to do. The cash from the US shares will probably go the same way. Remember the chart in the last post which showed how relatively undervalued those Chinese markets have become.

A friend asked me about Indian shares. I am sure that the Indian market offers just as much opportunity as the Chinese one. The problem is practical. There are many Chinese shares quoted on the US market and there are all those Hong Kong shares. They are easy to buy and sell and fairly easy to analyse and understand. India on the other hand is a black box and trading the shares is impractical.