There is a long held view that by taking a contrariety view to investing, investors can profit. In essence this is what the professionals do as they buy shares in good companies when no one wants them and then they sell them when the market has peaked. Historically the amateur investor does the opposite and in so doing reduces the ability of their portfolio to generate good returns.

In the current market conditions, many companies have been oversold as investors sell out through fear of losing, with many companies trading at prices well below their true value. The professional investor knows that this presents great opportunity for long-term gains and in our market these opportunities are likely to come from the energy, resources, healthcare and materials sector.

So what can we expect in the market?

In past reports I have mentioned that the market has periodically been unfolding in an erratic and unpredictable manner during the last year. This week we find ourselves in another period of unpredictable market conditions, given that my analysis indicated that the All Ordinaries Index would find support and start to rise.

While there have been signs that the market would rise, this was eroded today when the market fell heavily. I still believe we are close to the bottom of this down move and that the market will rise strongly in the second half of 2008. Therefore right now patience is the key as many opportunities will present when the market does turn.

Dale Gillham
Chief Analyst
Wealth Within

It seems that investors are failing to acknowledge that that market has changed and would prefer to cling to how they have done things in the past. But as we all know, the market has changed and so must the investor’s expectations if they want to get reasonable returns in the future. Prior to 2003 most investors were happy if they received a 10 per cent return on their investments. But as a result of the bull market in recent years, investor’s expectations are continuing to remain high.

In my opinion, investors now need to become much more realistic in their expectations and more selective in the stocks they hold. While good returns are still possible, we now have to work smarter to achieve them.

So what can we expect in the market?

Last week I indicated that I didn’t expect the market to fall below 5380 points and that it was more likely it would find support and start to rise. And while the market didn’t fall below 5380 points, it hasn’t exactly risen as I expected and it is still too early to determine if the next bull-run is starting given that the market fell away yesterday.

While the volatility in the market continues, I believe it will settle next week and the market will start to rise and continue on for at least the next 4 weeks. That said we still need to be prepared in case the market falls away, therefore I recommend investor’s continue to exercise caution, to only invest in quality shares and above all protect capital by using stop losses.

Dale Gillham

Chief Analyst

Wealth Within

Babcock and Brown has plummeted 35% this week, which I believe is due, in part, to the short selling being undertaken by institutional traders who are using the negative market sentiment to drive down prices in the banking and investment sector. Short selling involves selling shares you do not own with the aim of buying the shares back at some point in the future to close out the position. When positions are closed out on a heavily sold stock, like BNB, the share will generally rise very quickly as buyers scramble to exit their short position.

So is it time for investors to grab a bargain? In my opinion the answer is a resounding no. While many would agree that BNB has been oversold and its value is worth far more than its current share price, I believe it is still too high risk, at least in the short term, to own this stock.

So what can we expect in the market?

The market has continued to fall away this week indicating that investors are still very sensitive to economic and fundamental announcements. While the pullback has been longer in time and more in price that I was expecting, it does support my view in previous reports that investors need to be cautious and take a staged approach to entering the market.

Right now I don’t believe the market will fall below 5380 points and I expect it to find support and start rising again any day now. Of course, as we have seen over the past few months, the current market conditions are hard to predict and anything is possible. Given this investors still need to exercise caution, to only invest in quality shares and above all protect capital by using stop losses.

Dale Gillham

Chief Analyst

Wealth Within

The share market has been quite challenging this year with the All Ordinaries Index down 10.08% to 31 May 2008. The worst performing index is the Mid Cap index which includes shares ranked from 51 to 100 by market capitalization which has fallen by 15.77% for the year.

In 2007 all of the indices, with the exception of the top 20 rose between 11% and 12% but the poor performance of the market this year has essentially wiped out these gains. The good news is that in the 26 years since 1982 the All Odinaries index has only ever closed lower than it open for the year on five occasions and it has never had two consecutive down years. Given this, probability suggests that the worst of the volatile market is behind us.

So what can we expect in the market?

Last week I indicated that it was possible that the market could fall this week although I didn’t expect it to fall below 5720 before rising again. However, the market did fall below this level to a low of 5620 yesterday, which could be attributed to the fact that we are in a period where shares will exhibit volatility and possible false breaks, which as you may remember I mentioned in last weeks report. While it is possible that the volatility will continue until around 19 June, my expectation is that the market will settle and return to being bullish with it likely to rise to around 6155 points by the end of June.

Dale Gillham
Chief Analyst
Wealth Within

Next week heralds the start of June and the time when many of us begin thinking about tax. The bearish market of late has the All Ordinaries Index down 7.8% for the last financial year and as a result many investors would be sitting on losses with their investments. Given that brokerage is quite cheap, it may pay some investors to sell down their shares prior to 30 June to offset these losses against future profits in the following year.

Effectively an investor has the potential to sell a parcel of shares on 30 June and then purchase them back on 1 July with very little impact on their portfolio return but with the opportunity of reducing their tax in the current financial year. Of course anyone considering this should seek professional advice from their accountant to ascertain the effectiveness of this strategy in regards to their personal situation.

So what can we expect in the market?

The market has continued to fall away this week as expected, with the All Ordinaries hitting a low of 5736.2 points on Wednesday. Yesterday it turned to trade up strongly which may signal an end to the current down move; however the market needs to rise into next week before I am confident of this.

It is still possible that the market will fall in the coming week although I don’t expect it to fall below 5720 before rising again. Given this I believe the market will start to rise in June to achieve a target of 6155 points. Anyone looking to purchase shares still needs to be selective as it is likely that some shares will exhibit volatility and possible false breaks until around 19 June.

Dale Gillham
Chief Analyst
Wealth Within