Share Market Wrap 25th May 07
Monday, December 10th, 2007When filling up my car the other day I was surprised to see that I was paying almost $1.45 a litre, particularly when the price of oil is around 16% cheaper than it was mid last year. By the end of May 2005 oil was around $55 a barrel or 30% cheaper than it is today, yet we seem to be paying almost double for petrol today compared to what we were paying in 2005. In January 2007, oil made its 4 year cycle low and has since risen 32% in price. It is anticipated that the price of oil will continue to rise for at least 12 to 18 months from the low to trade above $80 a barrel. Over the longer term, I believe oil will trade to around $95 a barrel before we see any significant pull back. Given the considerable disparity between the price of oil and the amount we pay at the petrol bowsers, it concerns me how much it will cost us to fill up our car in two years time and who is profiting at the expense of consumers.
So what is happening on the market?
While it is still too early to confirm that the market is falling into its yearly cycle low, it has traded sideways over the last three weeks, which is a sign of indecision, thus increasing the probability that the market may fall away. In my last report I stated that the market peaked on 10 May 2006 before falling heavily into June 2006. This year the All Ordinaries peaked on 9 May at 6376.90pts, however, on Monday, Tuesday and Wednesday of this week the market traded slightly above this level before falling away each day to close below it. This adds strength to the fact that there is short term indecision in the market, and that eventually either the bulls or bears will take control to determine the future direction.
As you know I have been expecting the market to move down into its yearly low, therefore I believe the bears will take hold and we will see the All ordinaries fall for 2 to 4 weeks if not longer below 6100 points to as low as 5900 points. While this report has focused on the short term direction of the market, investors should not be too concerned as I believe once the market pulls back it should rise once again.


