Be fearful when others are greedy, be greedy when others are fearful

Equity markets worldwide have declined by an average of 50% as a result of the U.S sub-prime crisis. The credit crisis which ensued has now morphed into a full-blown economic crisis, threatening a global recession. The hedge funds industry - which controls a US$2 trillion pool of funds - played a destructive role in this catastrophe, according to George Soros. Equity and commodity markets have swung from one end of the pendulum to the other in a matter of months. Markets have never seen this kind of volatility before. Neither has the world seen a global melt-down on this scale!

Stocks have plunged far below their intrinsic value because of forced liquidation by hedge funds, pension funds and other money managers to meet redemptions. Between August and October this year, the hedge funds liquidated some US$60 billion to meet redemptions.

What this means is that we are provided with a golden opportunity to buy stocks at deep discounts, a chance that comes once every ten years. The last opportunity to buy cheap was during the Asian Financial crisis, some ten years ago.

“Be fearful when others are greedy, be greedy when others are fearful,” Warren Buffet advises those willing to listen to his mantra. But Buffet doesn’t just talk; he walks the talk! Since the financial tsunami, he has been gobbling up American blue chip companies such as General Electric and Goldman Sachs.

Warren Buffet buys based on his value investing principle. He says he cannot tell when and where the market will bottom out. And when it comes we may not be fast enough to catch it. So he allocates his capital prudently.

Another way to cash in on this crisis is to use technical analysis to time our purchases. Dan Zanger for example, uses bullish patterns to time his purchases. The technical approach eliminates the emotion of greed and fear from our trading, which is the number one enemy of traders. Dan Zanger has the track record to prove his method works.

Another successful trader without peers during his day was W.D. Gann. Gann adopted an holistic approach to trading by combining price and time cycles into his methodology. The speaker has been able to identify U.S bull market reversal in August based on Gann’s time cycle analysis, a powerful tool to forecast major trend reversals months ahead.

Our market direction depends a lot on the direction of the US market, the eye of this financial storm. If the U.S market bottoms out, then we can rest assured that world equity markets slide would at least be arrested. While the financial news coming out of the U.S is all bad, especially during the months of October and November, the S&P 500 has gained some 15% from the lows. This is an indication that the end of the bear campaign is near.

Although we cannot be absolutely certain that the bear market has ended, there are certain tell-tale signs we should be looking out for. This workshop, among other things will teach you how to identify the end of a bear campaign and the emerging trends to look out for so that you will not miss this opportunity of the decade.

Click here for more information about En. Ahmad Abdullah's workshop.

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En. Ahmad Abdullah is a seasoned expert in the finance insdutry. He was a fund manager, analyst, columnist and director of a stock broking firm. He is presently Executive Director of a licensed investment adviser. En Abdullah is an avid and practitioner of technical analysis.