Everyday we are being bombarded with news about the demise of the world’s share markets and economies moving into recession. While the media’s job is to sell papers, all this doom and gloom is becoming a little too monotonous. As we know the market is driven by changes in market sentiment, which tends to correlate with what many investment experts refer to as the investment clock. The clock itself assists investors to determine where we are in the current investment cycle and what they should do next with their money. With this knowledge the investor is able to make more informed decisions rather than the emotional decisions that are fuelled by the media frenzy.

A long time ago a wise individual told me that if you want to be come wealthy, listen and learn from someone who already is. Based on this I have found that it is far more beneficial and profitable to block out the noise of the media and instead focus on opportunities that always present themselves when times are bad. As we know good times never last and neither do the bad times; therefore right now you should be preparing yourself to take advantage of the opportunities that will present themselves when the market stops falling as the next cycle on the investment clock is for rising share prices and rising commodity prices.

So what can we expect in the market?

During the last two weeks the Australian market has continued to fall away to a low of 3215 points as of this morning. You will remember in my last report that I thought the move up early in October was promising but not enough to convince me that we had seen the long term low I have been expecting. I also mentioned that it was likely the move up was a false move and that there was a high probability we would get one more move down with the market likely to fall to a low of between 3400 and 3500 points.

Whilst the fall has taken longer and moved lower in price than I expected, I still believe we are close to the bottom. Even though we are close to the bottom of the current downtrend, it is not wise to pre-empt a market bottom instead it is far better to wait for confirmation that the bottom has occurred before acting. That said we, along with many others, are getting very excited about the market and are ready to enter once the low is confirmed.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

There is an old saying that markets don’t crash at the top but rather at the bottom simply because investors don’t panic at the top given that their shares have made money and they mistakenly believe prices will return to previous levels. This has certainly been the case in the current bear market given that the All Ordinaries only fell 2.7% in November 2007 and 2.6% in December 2007.
However, the falls in recent months (September -11.2% and October -14.%) has accounted for 44.08% of the total fall since the high in November 2007. The fall in October 2008 was the largest one-month fall on our market since the October 1987 crash when the market fell 41% in one month. Right now investors are making irrational decisions and cashing up for fear of further falls which is another signal that indicates the bottom on our market is very near.
So what can we expect in the market?

This week the market rose a little over 7 per cent before falling heavily yesterday in a reaction to the large fall on the Dow wiping off almost half of the weekly gain, and today the market is likely to fall heavily once again. Markets will always test previous highs and lows; therefore the current fall is a positive sign as we need to see the market test the low of 3693.90 that occurred on 28 October 2008.

If the market can stay above this level and subsequently rise there is a strong possibility that the market sentiment will shift from bearish to bullish. While it is possible that last Tuesday was the long term low we have been expecting, it pays to be cautious right now as there is still a possibility that the market could fall to between 3400 and 3500 points; either way we will know in the next week.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

During the past month investors have sold investments and moved their funds into cash following the announcement by the government to guarantee cash deposits in attempt to allay fears from the fallout of the credit crunch. But you have to ask whether moving funds into cash is really a smart move for investors? In my opinion cash is not a good investment vehicle for building wealth rather it is a vehicle for holding liquid assets while you wait for opportunities to invest. In my book, a good investment must deliver capital gains and income, with shares and property being the ideal investment for individuals wanting to build wealth.

Currently the inflation rate is around 5 per cent, and with cash deposits earning between 6 and 7 per cent investors are really only treading water by placing their assets in cash. If we add in the fact that investors will pay tax on the interest they earn on their cash you can see why I believe there is very little validity for considering cash as an investment. For investors with a long term view, it makes more sense to buy and hold solid blue chip shares such as Commonwealth Bank that pay a dividend yield of 6 per cent tax paid. After all, if the banks are safe enough to deposit your cash with, surely owning the bank is just as safe.

So what can we expect in the market?

Tomorrow (1 November) will be exactly one year since the all time high of 6873 points was achieved on our market, and since then it has fallen an unprecedented 3179 points or 46.25% making the past year one of the worst in history. Over this period we have had 33 weeks in which the market closed lower than it opened and if this week closes higher only 15 weeks that it has closed up, with 4 weeks closing roughly around where it opened.

This week the market has rebounded a little over 7 per cent since forming a low on Tuesday, and although this is promising it is not enough to convince me that we have seen the long term low in our market. It is likely this is a false move up and that we will get one more move down over the next week with the market falling to a low of between 3400 and 3500 points. Once this occurs I believe the All Ordinaries Index will trade up until late January or early February 2009. A word of caution for those looking to invest and that is to only buy shares in the top 100 as these will be much safer and more profitable.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au