As students of cycles, we know the big one we all are governed by is about to conclude, that is the calendar year. I say it every year, but it’s gone quickly for me personally and it’s fair to say markets are speeding up too. The reasons are apparent, technology has brought access and convenience to us all, but the downside is that we also cannot escape the noise that comes with it and the treadmill effect it creates. Markets create news and stories, people consume and then the need for more noise, news and stories becomes a circular response, but speeding up to feed itself.

Stick with me as I offer up one final piece to the conveyor belt for 2019. The year in review is a simple story economically, uncertainty and trepidation remain. We are told economies are strong but seem weak given interest rates are so low. The investment community knows markets are overvalued, dare I say bubble material, however, because they need to be “in” making a return at least on par with their peers, and so the merry go round continues… until the music stops.

Hence, we are better off trading the trend in most cases than trading against it. This year the successes I have seen have come from trading with the main trend and then holding on until a good reason presents to no longer be trading the markets that way. Two things are on my mind at this time of year as I alluded to last month, the Christmas rally and the natural review of the year of that was in terms of your achievements against your goals.

If you didn’t have any goals in 2019 you likely achieved them, if you did have a list of goals for the past year, now is the time to cross check. This to me is like checking your budget to actual in an accounting term. What was the plan, what was the outcome? I suggest placing all of your trades into three piles, winners, break evens and losers. From here you should be able to calculate your win/loss ratio. While this ratio is important, it’s not the be all and end all, it suggests how good you are in trade selection, but the average win and average loss ratios will tell how well you manage trades. On this, if you are not prepared to stack up your trades in the light of day for scrutiny and dare, I say inspection, trading as a business is some ways off for you. The follow on to this as well is it allows us to set goals for 2020 to target the right areas.

Onto markets, last month I discussed the Christmas rally.  Up until a few days ago the markets were powering along, and a pullback was not looking likely as the US and Australian equity markets powered to new highs. Then we saw a decline in the SPI200 and the potential for the set up of the low to high run we see in December to January.

Gann wrote about January 6th – 8th of each year to watch for activity, this can be seen with regularity in market stock index markets. Let’s look at the SPI.  We can see in Chart 1 the pullback in early December was within 1 point of repeating the September to October decline earlier this year.