A Season for Trend Following

All the assets that I wrote about yesterday continued with their trends. Nifty, Nikkei, Hangseng, HSCEI, Kospi and Euro Stoxx continued to be SELLs. As I write S&P futures too has turned negative by falling below 1316 (the SELL trigger that I mentioned in my note yesterday).

All currencies other than the Yen are depreciating against the Dollar. This includes the Euro, Pound, Australian Dollar, Canadian Dollar, Swiss Franc and finally the Indian Rupee. This is in sync with the SELL in all equity indices.

Commodities have not remained immune to the Sell off and commodities like Crude, Copper and Silver are in Sell modes. Only Gold futures (S only < Rs21640 or USD 1462.50) remains in a BUY mode. The uptrend in Gold is again indicative not only of a renewed "flight to safety" but also of a renewed "Save me from all Govt backed paper currencies trade"

In such uncertain times, what kind of fundamental analysis can be done to make informed investment decisions? I would assume that fundamental analyis can be done in a largely stable environment. In an increasingly unstable world that we currently reside, fundamentals and consequently investment decisions can go wrong along with the business environment at the drop of a hat.

At such times, trend following which has no particular bias to be long or short and therefore able to adapt to the ever changing environment comes to the rescue. That is why in my notes you will see statements like Nifty is in a SELL mode and becomes a BUY only above 5624 or that Gold remains a BUY until USD 1462.50 is broken or Rs 21640 is broken on the downside.

While most times trend following has its problems with its whipsaws and frequent small losses, this could just be the Season for Trend following!