Wealth Within - All Ords Report 28 August 2007
ASIC is finally investigating internet stock forums based on allegations that a number of members are ramping shares. In my opinion this investigation should have been undertaken many years ago, but as they say it is better late than never.
Based on my experience internet trading forums are a bit like the blind leading the blind, a fact which opportunists know and use to their advantage. Despite the publicity surrounding illegal scams, people still get hooked in the hope of making money and people join online share market chat forums for the same reason; so it’s no wonder people lose money.
I know many experienced traders and none visit these types of forums, and for good reason. As I have always said, the only way to be consistently profitable in the share market is to get a solid education from experienced professionals that are focused on you achieving your financial goals.
So what is happening in the market?
In my last report I stated that the market would most likely rise for around 5 to 10 trading days from 10 August before falling away again. I also indicated that there was a probability the market may not rise, however, the All Ordinaries Index would need to fall below the low of 5922 achieved on 6 August, which it did falling below my target of 5600 into a low of 5490 on 16 August.
During times when the market experiences significant volatility like what we have seen recently, it is always better to take a global view to understand the facts rather than get caught up in the emotional microscopic view. As of the low on 16 August, the All Ordinaries Index had fallen 978.40 points or 15.12% in price over 24 trading days. In 2006 the All Ordinaries Index fell 626.10 points or 11.69% over 24 trading days into the low of 14 June 06. Given this, the recent fall can be placed in the context a normal market pull back.
Even though the market has risen strongly out of the low from 16 August, we are yet to confirm it has stopped falling. This is obviously very important if you are considering any new positions in the market; therefore caution needs to be exercised as there is still a high probability that the market will fall further, particularly as we are in the time period for the 4 year cycle low.
It is possible that what we have seen over the last few weeks is the start of the fall into the 4 year cycle low, which if correct means the All Ordinaries Index could move down to around 5000 points over several months, although given the way the market has behaved in recent times this may occur sooner rather than later. For now it is better to sit back and take a wait and see attitude until we can confirm the medium to longer term direction of the market. Once the low is confirmed I believe the market will rise and present some great buying opportunities.
Until next time
Good luck and profitable trading.
Dale Gillham
Chief Analyst
