SURELY only cynics and psychopaths believe the JSE's new all-time high confirms we're in a bull market.

For the best part of 14 years I lurked on the chat board of moneytech.co.za and its successor page88.co.za, before the latter was disabled by malware in January.

I observed amazing success, particularly during the high-speed run in the likes of Dimension Data. In those days, technical trading involved picking a "liquid trender", a share showing keen buyer interest backed by plenty of speculative cash.

Warrants were the preferred derivative tools, later to be augmented by single-stock futures.

Didata wasn't the only fancied stock: it was not solely a tech-driven bull market in the fiery days of the late 1990s. Many a trader made a fortune on the likes of Iscor and De Beers (both later to be delisted) and grand dame Anglo American itself acted like a bouncy teenager growing inches every month.

The trick in trading, back then, was to follow old-fangled Dow Theory: a rising share price will fall to a certain level (a "lower high"), bounce, then attempt to break the "resistance" level of its former peak. Should it pierce that mark, all bets were on. In the case of Didata et al, the money-making bet was to follow the primary trend.

It was simple: the mood of the market, disregarding as it did the silly price-to-earnings ratios of the stocks in question, divined that buying and holding was a sure thing.

Certainly, the big money (what day traders call "pigmen") would try to finagle prices, but in a rollicking, liquid market, an almost universally positive sentiment reigned free.

After the crash in 2001, global market indexes recovered, then collapsed again in 2007. But few of the smartest could find a direction worth trading.

Going by texts I saved from those millennial days, there had been a change in attitude. Trend-following trading systems no longer worked. There were no more "liquid trenders", no sure things.

Some day-traders tried buying and selling based on crossovers on a share or index's seven- and 21-day moving averages. It was a hellish hit-and-miss trial.

Many traders, some of whom I met, went bust. Their trading systems were always top notch, their dedication and discipline went without question. Yet something went cockeyed. No previously infallible techniques worked.

Nobody likes to admit to believing in voodoo, but six years ago Elliott Wave theory (based on the mood of the market translated into buying and selling behaviour) said we were entering a blow-off phase. The buying spree to date has been supported by nothing but hope, which is why I, belatedly, agree that we're in for a ghastly 2013.

 

* This article was first published in Sunday Times: Business Times