What does Australia’s steel industry and some of the big Aussie retailers have in common?

Since the GFC investors have watched the once ‘market darlings’ like Bluescope Steel and OneSteel plummet to new at all-time lows, and now some of the big names in retail are following suit.

Billabong International and Myer Holdings have this month broken to new lows as ongoing pressures from a boom in online shopping due to a high Australian dollar, and lackluster consumer sentiment, continue to weigh heavily on the share price of these companies. Looking forward the picture is not looking brighter as retail shares are likely to experience further declines over the coming months.

High profile industry players, like Harvey Norman boss Gerry Harvey, lost the debate with the Australian government to cut the GST in an attempt create a level playing field for Australian retailers grappling with competition from overseas imports.

Given the government’s pledge to provide assistance to the steel industry you can’t blame the retail industry for putting a hand out for assistance. But as this failed, retailers need to get on with business and do whatever is necessary to survive. Like Harvey Norman, this may mean going offshore to set up online shopping.

What do we expect in the market?

Last week the Australian share market held its ground to close at 4192 points, or at around the halfway point of the week’s range. The current lack of direction is not unusual for this time of year, when trading volumes are typically low.

What is of interest though is a scenario that has occurred almost every year over the last 20 years; in January the market has moved beyond the highest level achieved during the last week of December.

Given this, as we move into the New Year, the probability is very high for the All Ordinaries index to trade above this week’s high of 4193.7 points to challenge resistance at around 4300 points. How the market unfolds shortly after this rise will set the scene for the first half of 2012.

On behalf of the Team at Wealth Within I would like to wish you all a safe and happy new year.

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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 learn to trade shares and 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 Australian government’s decision this year to ban live exports to Indonesia may have backfired as the Indonesian government have this week announced plans to cut Australian cattle imports as part of a plan to become self-sufficient.

In my opinion, this situation is a lesson for the Australian government, and yet again, is another case where Australian farmers will come off second best. Whilst I supported the need to pressure the Indonesian government to lift the standards in controlling the humane treatment of animals, I felt that our government’s response was too heavy handed. So in the end, what have we really achieved? 

Frankly, I am not surprised by the announcement from the Indonesians to sure up their own industry. What the government has done is put at risk an export market we clearly cannot afford to lose, and this, in an environment where we are constantly reminded about the fragile nature of our two speed economy.

Further, the Australian public have not heard much in the media about whether the standards that we forced the Indonesians to comply with are actually still being adhered to. So in the end, taking the moral high ground about the practices occurring in another country has left mud on our faces, and taken the public’s attention away from the fact that there are still unresolved issues in our own meat industry.

What do we expect in the market?

Last week the Australian share market lost the battle to remain above 4300 points and continued the decline this week into a low on Thursday of 4175 points. Looking back at what has unfolded post the prior week’s high of 4391 points , the All Ordinaries index has fallen over a total of eight days, with buyers moving back into the market cautiously on Friday to lift the index away from the low.

Although the recent decline has been longer in time and price than I was hoping would unfold, there is still no indication on the charts to confirm that market sentiment has changed and therefore, technically this means that the market is still trading sideways. However, as is always the case when a battle for control is unfolding between the bears and the bulls, until agreement is reached the direction of the market will remain unchanged, but remember that only one side can win.

Given this, there is nothing further investors need do with their portfolios until we see a break out of the current consolidation and as the status quo is unlikely to change until the first quarter of 2012, investors can take time out from the market to enjoy the festive season.

On behalf of the Team at Wealth Within I wish you all a very merry Christmas and a safe and happy new year.

Visit our Facebook page for links to more detailed discussions on world markets.

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 learn to trade shares and 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

Listen to this Australian Share Market Report via audio podcast just click Upfront Investor

The banks again had mortgage holders living in hope that rates would drop in line with the RBA’s 0.25 per cent cut this week. But in a situation that is becoming all too normal, the banks stood their ground until mounting government and public pressure finally drove them to follow suit.

Although they did match the cut later in the week, it came with a cloud of doubt over whether they would allow future rate cuts to follow, citing increasing global economic uncertainty as the reason. Critics see the recent stand-off as evidence that the Big Four are sticking together, and this puts a question mark on banks as consumers want to know whether Australia really has a competitive banking industry or whether such a premise is an illusion.

For the past 12 months Wayne Swan has been instrumental in supporting smaller banks so as to improve the playing field, however, we need to see evidence that this is working. Just because ME Bank stepped up to cut rates almost immediately does not mean the government can take credit, remember that ME Bank have a history of supporting Australians. As the saying goes, ‘the proof is always in the pudding’ and in light of the financial results of the Big Four this year, where is the justification for not passing on the cuts?

What do we expect in the market?

Following the 288 point rise on the Australian share market last week we saw the buying continue into Monday’s trade, lifting the market by a further 45 points to a high of 4391 points. Given the strength of the rise probability suggests that further rises are on the cards however, in the current market conditions it is important to be prepared in the event the opposite happens.

I see no reason to make rash decisions in response to the falls of the past few days as the market is still holding above support between 4100 and 4200 points. What we are seeing is to some extent a reflection of the cautious stance being taken by the institutions awaiting the outcome of the European Union Summit. Traders see the current move as part of the normal ebbs and flows of the market, in other words, they know in order to get the gains you have to be prepared for some falls along the way. For now we are still bullish on the market for the next few weeks.

Visit our Facebook page for links to more detailed discussions on world markets.

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 learn to trade shares and 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

Listen to this Australian Share Market Report via audio podcast just click Upfront Investor

A few weeks ago the Australian government announced its decision to sell Uranium to India, and more recently this has been followed by news of the trade-off that India had to make in return for our Uranium. It seems India has to opened the door to Australian companies like Woolworths who want to break into the Indian market place. On the surface this decision appears to be about jobs and growth for Australia, and is in line with our government’s motto. But it doesn’t stop there, as it seems that the plan has always been to strengthen ties between India, the US and Australia with the intention to use this golden triangle to put pressure on China in a number of areas.This week evidence that the plan may be working came when China announced that it will loosen monetary policy by lowering the reserve requirement ratio for Chinese banks. This effectively means that the value of the assets the Chinese banks have to hold relative to the amount of lending on their books will fall. Now I don’t blame the Chinese for keeping a reign on lending in times like these where there is fear of global defaults. If the Americans had applied this thinking to their banks I wonder if they would be in the mess they are in now.
 
What do we expect in the market?

Last week the media were focused on doom and gloom surrounding financial markets which further heightened investor fears and lead to a strong sell-off on the Australian share market. This saw the All Ordinaries Index trade down through our support zone between 4100 and 4200 points to a low of 4047 points on Friday. However, as expected the market reversed this week to recover value in excess of the previous decline and this is an indication that a further rise is likely to follow.In my report last week I stressed how it is important to wait for the market’s reaction to such strong selling pressure to determine whether there is a real commitment to the down move or whether what we saw was a simply another distortion as seen in September. Sadly, investors and the un-educated in the market continue doing what they have always done, which is to make emotional decisions based on fear. In contrast, the educated and well informed know how important it is to have the knowledge to read where the money is flowing, rather than being jerked back and forth along an emotional roller coaster by news and world events.

Visit our Facebook page for links to more detailed discussions on world markets.

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 learn to trade shares and 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

Listen to this Australian Share Market Report via audio podcast just click Upfront Investor

The massive pressure applied from the mining industry has seen a watered down version of the Minerals Resources Rent Tax pass through the lower house of parliament this week.

Once the tax is passed through the upper house, I believe the government need to shift their sights to another sector that does well off the backs of Australians, that is the banking sector. The Big Four Australian banks continue to announce record profits even in the wake of the GFC.  In my opinion, the fact that these banks are making billions in profits in the current climate is evidence that Australians are still paying far too much for the essential services they provide.

Given how big and dominant our banks have become, the question remains is whether the current Australian government has the power to go up against these banks. History shows when challenged by government heads, the banks can and do raise interest rates over what is considered to be a fair margin above the rates set by the Reserve Bank of Australia (RBA). They then tell us the rise was necessary to cover their costs.

Given that over the past 20 years banks have continued to fleece ordinary Australians, if the next shot is aimed at the banks I don’t think the public will rush to their defence.

What do we expect in the market?

The Australian share market has continued to pull back strongly to test support between 4100 and 4200 points. Regular readers would recall I have previously made mention of this level on a number of occasions, and whether or not it would hold.  Whilst the All Ordinaries traded through to the bottom of the range this week, it does not mean that a further decline will follow as in my opinion the market could still go either way. Let me explain…

The current volatile market sentiment opens up a situation for speculators and institutional traders where they can take advantage by distorting prices based on daily news emerging. Given this, it is important for anyone to wait for the reaction that may occur before drawing conclusions, as any move may just be a short term distortion rather than a trend emerging. 

My analysis still indicates that the market may find support around current levels before a rebound occurs, as such, now is the time to be patient and consider how the current situation is similar to what unfolded in mid-2010 before a strong rise occured. Therefore my expectation is still that the market will turn up again very soon.

Visit our Facebook page for links to more detailed discussions on world markets.

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 learn to trade shares and 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