We now have a new Prime Minister, but is the change akin to shuffling the deck chairs on the Titanic, or is it likely to be good for Australia? I’m all for having a female in the nation’s top job, but it seems to me that politics is more about getting re-elected and making compromises to suit the big end of town, rather than serving the Australian public. From what I see the mining industry with all their power and money have used their considerable influence to decide what should or should not occur.

I am not biased towards Kevin Rudd or Julia Gillard, but Australia needs a leader that does what is right for the country rather than just what will help them win the popularity stakes. The big issue that has rocked the boat is the proposed Resource Rent Tax, which appears to be the right thing for this county if you look past the rhetoric coming from the miners.

From what I can see, the events of this week will not benefit the Australian people as it only increases our distrust of politicians and a political system. It also does nothing in the immediate future to calm the Australian share market.

So what do we expect in the market?

This week the Australian market has been far from impressive, as falls during the past few days have literally wiped out recent gains with our market trading at September 2009 levels. Whilst on the surface this may look give cause for concern, it is quite possible that after trading up for the past four weeks the market is now doing what is actually quite normal.

Let me explain. In a normal market, prices will generally rise over four to six weeks and then fall for one or two weeks before rising again. If this is unfolding we should see the All Ordinaries Index rise over the coming weeks to my target levels. In saying that, whilst activity this week can be considered normal, we know the market has been far from normal over the past two years, and therefore we need to consider the possibility that it may fall away for a further four to six weeks to around 4,000 points. Given this, again I suggest it is wise to set stop losses on your shares to protect capital. 

Over the years I have met thousands of share market traders, and the one thing that stands out is how more money can be made by trading less and over longer periods, rather than from day trading. This is why it never ceases to amaze me that when people find out I am a trader they automatically assume I am a ‘day trader’. Now I can hardly blame them for making this mistake when share trading is often talked about in the media as day trading. What is never talked about is how unprofitable this approach really is, yet so many attempt to go down this path only to find they were doomed to failure. 

But why are so many who attempt to trade the share market unprofitable when there is so much information available? I put it down to human psychology and a lack of knowledge. The minute you put your hard earned cash into the market you are likely to be affected by price movements, and the more you look at the market the more emotional you are likely to become. This is ultimately why mistakes are made that cost money. The most important thing I teach traders is to trade less by considering the bigger picture, rather than being focussed on short term price action. This requires less time to manage your investments and you’ll make more money. Now that has to be a better way. 

So what do we expect in the market?

Despite the general upward movement of the market over the past week, the rise hasn’t been convincing. We are now at the end of the third week of June and the All Ordinaries Index has only risen 2 percent for the month. Further to this, the rise occurred on slightly lower volume which indicates there is still uncertainty about the likelihood for the market to move forward.

 Whilst I still believe the market will continue to rise over the next month through 5000 points and up to my target of around 5200 points, I would prefer to see it gather more momentum as it moves up. The longer the market stays subdued the more the rise will become unsustainable, and therefore if this continues probability suggests it could turn and fall away again. Given this, as I often suggest, it is wise to set stop losses on your shares to protect capital. 

It is nearly tax time again and this is one area that many would prefer not to look at. Let’s face it - most of us do not like paying tax or to be precise, paying more tax than we need to. But when it comes to the share market many investors often lose thousands of dollars because they are told by professionals to hold onto a stock that is falling in value rather than sell and pay capital gains tax.

Whilst paying capital gains tax may be less of an issue given the impact of the GFC on many portfolios, I believe now is a perfect time to review your portfolio and clean it up, so to speak. Let me explain. It is widely publicised that we should minimise the capital gains tax impact of our investments by exiting shares that are in profit and offsetting this by exiting shares that have suffered a capital loss on or before 30 June. Often I have found that when investors clear out the deadwood in their portfolio to get a clear and fresh start, they feel much better, and more importantly their portfolio performance starts to improve. So my advice is to see your accountant now to see what you can do.   

So what do we expect in the market?

If you have been feeling like you are on a massive roller coaster ride with your portfolio in the past few months, you are not alone. Currently the All ordinaries Index is trading around August 2009 levels, but in between then and now the market has fluctuated up and down by more than 10 per cent on several occasions. To put this into context, between March 2003 and November 2007 the All Ordinaries Index had only twice fallen greater than 10 per cent, including the 11 per cent fall into June 2006 and the 15 per cent fall into August 2007, yet in the first 6 months of this year the market has fallen twice by greater than 10 per cent.  

This week the market has continued to hold above the important 4300 point level, which again increases my confidence that the low of 4194.40 on Friday 21 May was our yearly low. Given this, I still believe All Ordinaries Index has a reasonable chance of rising up to my target level of around 5200 points around late July. The only reservation I have is that it will need to get through the strong resistance around 5000 points that has turned the market twice this year, however, I believe in third time lucky.  

Over the years I have continually warned people about share market scammers, and it now seems they are back to conning people out of their hard earn money. This week I have received two emails from people who have been contacted recently by telemarketers promoting quick riches from the share market. The callers suggested that anyone could use their system, which has secret or privileged information in it. They further stated you would require no knowledge and very little time to achieve 86 percent winning trades and huge profits. Immediately, this sort of claim should ring alarm bells.

Here’s the con, they also offered a ‘today only’ deal, where the individuals could pay half of the $9,000 fee now and pay the other half after they make $20,000 in profits. The reality is they know many people will give them $4,500 and they will never receive the other portion. There are only two words I can say about these unscrupulous marketeers and neither can be put in print. My advice to anyone receiving calls similar to this is to hang up and ring ASIC or visit their website www.asic.gov.au to report them. Above all do your research before handing over any money.       

So what do we expect in the market? 

The market fell away earlier this week to test support around the 4300 point level I talked about over the past month. The good news is that this level is holding and more importantly, the strong move up by our market on Thursday increased my confidence that the low of 4194.40 points on Friday 21 May was our yearly low. 

If this is the case, then as suggested last week, I believe the All Ordinaries Index will be bullish over the next 6 to 8 weeks and rise up to my target level of around 5200 points around late July. Given this, we could reasonably expect our next low to occur sometime in August or September. Good opportunities could come from the larger stocks in the energy, media and materials sectors. A word of caution though, while I believe the market is likely to be bullish there is a high probability it will be volatile, with large swings in price both up and down.