This month has seen a renewed interest in the banking sector, especially since the US announced its latest package to support the financial industry. Of the big Australian four banks, WBC has risen around 19 per cent, while NAB and CBA have each risen around 20 per cent, with the standout performer being ANZ having risen around 28 per cent during March. While on the surface this suggests that the banks are now back in favor, I would question whether this is really the case.

Often investors take a short term view when it comes to the share market. It is common for investors to think that if a stock has been rising for a few days or weeks it will continue to rise, only to find it turns and falls away shortly after buying it. In my opinion, I believe this will be the reality with the banks as they have not proven that the current rise is sustainable, rather it appears to be an over reaction to the news in the US.

The banks have risen too quickly since the announcement and we all know that what goes up fast must come down. Therefore I expect to see the banks fall in price very soon to test their prior lows, and it is only after this that will we get an idea of whether they will move up over the long term or if the current move is just a bear market rally.

So what can we expect in the market?

The Australian share market has now been rising for fourteen days and over 19 per cent in price in the longest move up since the bear market started in November 2007. As I mentioned last week, volume has also increased which is a good sign as it suggests that the current up move is sustainable at least in the short term.

That said I believe the pace at which the banks have risen in recent times is unsustainable, therefore we need to expect that price will fall away in the next one or two weeks. The longer and faster the market continues to rise in this current move, the higher the probability that when it turns to test the low achieved on Monday 9 March, the bigger and faster the fall will be.

I still believe the market will rise up into May or June of this year to between 4500 and 5000 points although it is possible that the rise may be longer in time and higher in price but only time will tell. Right now I would caution investors against getting caught up in the market hype and investing all of their money in an attempt to regain the losses of the past few years. It is far wiser to take a staged approach to entering the market and to use sound money management rules to protect capital.

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

Last week I was in Malaysia speaking at the Asian Traders and Investors Convention and I have to say I was I surprised that many of the attendees had little or no knowledge yet they were attempting to trade highly leveraged markets such as futures and currencies. Now it would seem logical to me given the current market conditions that traders and investors would be erring on the safe side and looking to invest in the largest and safest shares, but this was not the case.

Unfortunately the same is occurring in Australia, with many traders taking very high risks trading markets they shouldn’t or attempting to get into the market based on the perception that shares are cheap when in fact they are still falling. I have said it before and I will say it again, it is critical, more now than ever, to be educated in the mechanics of the market if you want to survive.

Over the next two years our market will be volatile and at times unpredictable, and I firmly believe only the educated will profit. The lack of knowledge over the past two years has cost ordinary Australian’s $10’s of thousands of dollars and in some cases millions. Sadly many will do nothing about it preferring instead to gamble with their money, when the solution is really quite simple. There is an old saying that ignorance is expensive, and this has certainly been the case over the past two years. Gaining a solid education, however, will cost far less and yield much better returns over the longer term.

So what can we expect in the market?

The Australian market has now been rising for eight days, but before we get too excited, it is important to remember that the market also rose for eight days in January before falling heavily over the next 11 days. The difference on this occasion is that volume has also risen with 30 to 100 per cent more volume being traded than was the case in January.

Given that increased volume is supporting the current up move I believe this is the start of the rise up into May or June that I have been expecting. That said given that the market has been rising for eight days we need to expect that it will fall away for a short period before rising once again. Therefore do not be surprised if the All Ordinaries Index falls away in the next week to find support at or around 3250 points, after which we should see it rise up and present some great buying opportunities.

Unless investors are buying the top 10 shares and holding them for 10 years, they should take a shorter term outlook, implement a staged approach to investing their money, and use stop losses at all times. Failure to use stop losses in the current market will ultimately result in increased risk and potential losses.

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

The government is at it again, handing out more money to Australians in the hope they will spend it to stimulate the economy. But with the significant rise in the unemployment figures, I am sure most people will be worried about their job and the security of their family over the next 12 months. Given this, it is unlikely that the money will be spent as the government intended. Instead I believe the wise thing to do would be for people to put the money toward reducing their personal debt.

Surely the government would be better off putting the money into the hands of those who will create jobs and deliver assets that as a society we can benefit from for generations to come, not just stimulate the economy for a quarter. Why not reduce taxes for small businesses who employ 80% of Australian’s, or incentivise those who enter into contracts to build new houses (not just for first home buyers) or buy Australian made cars. In my opinion giving cash handouts to certain individuals is simply applying short term thinking to a long-term problem, and is doomed to fail.

So what can we expect in the market?

On Monday the Australian market fell to a low of 3052.50 points or its lowest point since June 2003, while in contrast the Dow is now trading at levels not seen since April 1997. This is further evidence that our market operates independently of the Dow and also confirms it is far less volatile than the Dow.

The good news for investors is that both markets have started to show signs of reversing the current down move over the past few days. If the market continues to find support and trades up over the next few weeks I believe, as I have previously indicated, that the market will rise through to mid year to between 4000 and 5000 points.

The challenge I see over the next few years is that the market will not be suited to those who want to buy and hold instead it will reward those who are educated and know how to actively manage their share market investments. It is essential for anyone looking to enter the market that they practice sound money management techniques or they might be in for a rocky ride.

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

Dale Gillham will be once again featuring on the Sky Business Channel programs “Market Moves” at 6:30-7:00pm and then again on “Your Money, Your Call” from 7:00 - 8:00 pm EST tonight, Channel 602 on FOXTEL and AUSTAR.

Dale has also recently featured on evoTV.com.au in the interviews entitled “Slow and Steady” and “Wealth Within Approach“

I received an interesting newsletter from a prominent investment institution this week attempting to allay investor’s fears in regard to the share market. Obviously many investors are either leaving the managed funds preferring to invest directly or they are simply losing faith that the funds can deliver.

What concerned me most about the newsletter was their continued barrage about the benefits of dollar cost averaging. When will the industry learn? If the events of the past 18 months have not been enough to prove that this technique is flawed then what hope has the average investor got? Maybe they should read my book – How to Beat the Managed Funds by 20%’.

It is basic common sense that if an asset is falling in value you do not buy more as this will increase risk. In my opinion dollar cost averaging is and always will be a marketing ploy used by institutions to keep ordinary investors channelling money into the managed funds so that they can profit rather than the investor.

So what can we expect in the market?

The bad economic news in the US has again rocked world markets over the past week, with the Australian share market falling below its low in November 2008. This highlights why I have continually said over the past 4 months that even though I thought the November low might be our long term low it was yet to be confirmed and investors needed to be cautious.

Our market has now been falling for 10 months since May 2008 and I cannot find another time in history that this has occurred. It would, therefore, be correct to say that it is extremely rare for our market to fall for so long without at least a few months trading up. The Dow fell 23% over 14 months without rising into 1978, and currently it has fallen 44% over the past 7 months without rising.

Given this, probability suggests that the bottom should occur on our market very soon. It is possible that today could be the bottom and that we will see a strong move up into around mid year to levels of between 4200 and 5000 points. That said it is possible that the current volatility may remain until the end of the month. As always we need to wait for confirmation that the down move is finished before acting.

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