Wealth Within - All Ords Report 15 July 2008
There is an old saying that the darkest hour is just before dawn and this is, at times, a very appropriate phrase when referring to the share market. In October 1997 experts were predicting a global meltdown as a result of the Asia crisis, yet our market rose 40% over the next two years. The same situation arose following the tech wreck in 2000, yet our market rose over 18% the following year.
Following the September 11 crisis, experts where once again predicting doom and gloom for the world economies, but our market only fell around 6% over the next 18 months into March 2003. Since then, we have had the biggest bull market in history; therefore the pull back in the previous 12 months is a natural process whereby the market is simply adjusting to more realistic levels. Since the Asia crisis our market has risen nearly 130%, despite three major events that were predicted to have enormous impact on our economy. The question that remains then, is it time to buy? Not yet but it is getting pretty dark, so be prepared.
So what can we expect in the market?
Over the past eight weeks the market has been in a sustained down move, with the All Ordinaries falling to a low of around 4900 points today. The last time our market fell for a prolonged period was the eight-week fall into the March 2003 low, and we all know how well the market performed following this low. Given that the market has once again fallen for eight weeks, it is highly likely it will rebound over the next one or two weeks, although I don’t expect it will rise in a sustained bull market like it did out of the March 2003 low.
While it is possible that any rebound in the next few weeks could signal an end to the current market fall, I believe it is likely to be short lived as I am expecting the market to fall away one more time to exhaust the current downtrend to eventually find support around 4800 points in the coming month, although it is possible it could fall to the next level of support at 4316 points. Once this occurs, I strongly believe the market will return to being bullish.
While I would urge investors to remain patient, I believe it is time to get ready to take advantage of the next bullish move, which will occur in the not to distant future. As I have indicated previously, I still expect the second half of this year to produce good profits for those who are patient.
Until next time
Good luck and profitable trading.
Dale Gillham
Chief Analyst