Never Try And Catch A Falling Knife In The Markets

One of the most common investment expressions is the following: buy low, sell high. In fact, that holds true for most all trading activity where profit is determined between the difference between the buying price and the selling price. We now know better; traders can generate substantial profits by correctly anticipating the future price vis-a-vis the present price of an underlying financial asset. This is done on futures markets and in binary options trading activity.

However if we look at traditional forms of investment, buying low and selling high still holds true. We are now at a critical juncture in global equities markets. Pervasive weakness is the order of the day from the Shanghai Composite Index to Wall Street, and nobody quite knows when the markets are going to bottom out. A quick recap of recent stock market performance will make things a little clearer:

These are but a handful of many global bourses currently languishing as a result of China weakness, slack global demand, commodity price routs (led primarily by weakness in crude oil), and a rampant US dollar. We have seen equities prices losing ground since Monday, 4 January 2016, and there appears to be no safety net available to arrest further declines. Of course, it doesn’t help that the world’s biggest consumer of commodities like crude oil, copper, iron ore and the like is in a financial rut.

Nonetheless, there have been alternative investments such as gold that are gaining favour among traders and investors. The gold price recently rallied to 9-week high of $1,112 per ounce, but has since retraced to trade at $1,090 per ounce. Even gold cannot sustain its multi-week highs as a result of a strong USD and slack global demand. However there is merit in safe-haven assets such as gold for the short-term.