Indicator In Trouble

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By Rudi Filapek-Vandyck

The problem with having an indicator, as every technical chartist will tell you, is knowing how to read it. The motto of many experienced traders is if it’s not a clear sign, don’t bother.

The FN Arena ‘Neutral’ indicator has dropped below 51% again today, but only after climbing to 51.02% yesterday. The question now is should we take an error margin into account before drawing any far reaching conclusions from this?

Regular readers will know by now that every time the indicator has dropped below the magical 51% during the past four years Australian shares retreated soon after. But can today’s micro-movement be interpreted as such?

The answer lies probably in the hands of the US Federal Reserve Bank who is to announce later today (US time) whether US interest rates will go up by another 25 basis points or not. Overall market opinion is rates will go up further but a pause is likely to follow.

Any surprise is bound to instigate strong movements either way.

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