As I scanned the financial print headlines Thursday - I only scan as reading detail clogs my brain - I quickly recalled a heading only a day earlier which just told a very different story. On Wednesday our Reserve Bank Governor was reported - on the same front page - as saying things would be sweet as here in Australia" well, not in those words. And then on Thursday the IMF were reported as saying we are heading down the gurgler.

What do you believe?

Both sources for these outlooks are very well respected but then we have a "stray" element - and that is how the media presents the information.

Over the past month or so we have seen investors romp into the market, but cast your memory back just a few weeks earlier. Can you recall that investors were bailing out in droves? Yes, no wonder you are confused. Reality has not changed - only the headlines.

You do know that the sharemarket can be a leading indicator in that it can improve before the economy does. What we don't know is how long the lag is. Is it 3 months, 6 or 9 or 12 months? Well not even a room full of economists could agree on this, as it is not something we can be precise about. Even though we have had many recessions to look back on each one is only a guide.

And because our interest is not academic but rather bald-face money making, we are not so interested in any quantitative modelling that may spit out a formula such as:

Chart 1

(If you want the workings for this just email me, but it won't help you make money.)

What is key in all of this is to get the big picture right. The next bull run will be the mother of all bull runs and so to fine tune at this point of the cycle is not so important. It is better to buy back when we have a higher confidence level that risk is easing.

So in my view it is better to buy as the market emerges out of its low rather than punt at a time when a rally may just be that. That is, it may be merely a landing before the next plummet.

Relax take it easy. Trade the short-term moves. If they become THE new sustained rally, then that is good luck to you!

Enjoy the ride.

Tom Scollon
Chief Analyst
Trading Tutors Team