I make no secret of the fact that I think that the local market is very short on opportunities for trend followers. In this day and age there is no excuse for not utilising the ability technology gives you to diversify internationally – to not do so is simply lazy. To highlight my point consider the two charts below. the first is the value of $1 invested in the All Ordinaries since 1987, the second is the All Ordinaries drawdown curve.
As you can see the price trajectory for the All Ordinaries lately has been poor. When coupled with the fact that we are still technically in drawdown and well below our pre GFC peak there is not a compelling argument to stick with the local market. The S&P500 offers a very different picture.
If we took the simplistic view that the S&P 500 were a trading system we could say that it is almost twice as good as the local market based upon these somewhat simple metrics. For those who say that the local market must go up beyond its previous peak because an index cannot stay in drawdown forever consider the underwater equity chart of the Nikkei.