Upfront Investor Share Market Report 12/10/09

http://www.youtube.com/watch?v=BbVQH1TFVY0

If you are confused about where the economy is heading and whether you should fix the interest rate on your housing loan, or what you should do with your investments, you are not alone. The past year has been one of contradictions given that we were told interest rates were likely to fall further and now they are rising, to use the government handout to buy imported goods because the Australian dollar would continue to fall and prices would rise, that property prices would fall which has certainly not been the case and that unemployment would rise above 7 per cent. Given this, it’s no wonder many Australians are confused about what they should be doing.

Given the uncertainty about world economies, and the fact the US is now in reporting season, I don’t believe the current confusion will ease. I have always found it beneficial to plan for the worst and hope for the best, that way you have both bases covered.

So what can we expect in the market?

I have said before that the market will always do what it wants, not necessarily what I think or would like, and this has certainly been the case over the past month or so. The strong rise in the market over the last few days has now pretty much put an end to any hope of seeing the short term low I was expecting. While we did see a small pull back in price, this was not enough to satisfy what would normally constitute a normal cycle low.

Over the past two years the market has behaved extremely erratically, which is why I continually say to trade on confirmation not speculation. It is far better to let the market tell us what it is doing rather than act on what we think it will do.

So where to from here? While I expect the market will now rise up for the next 1 to 4 weeks to between 5000 and 5200 points, all is not rosy. Generally when the market fails to fall when a low is due, often results in any future correction being more severe. Given this, I would not be shocked if during the US reporting season we get some surprises which cause the market to fall away strongly into a low in November or December. Depending on how far the All Ordinaries index continues to rise over the next few weeks, the market could fall to as much as 4200 points.

Right now I believe it is safe to continue holding shares in the market at least in the short term, however, I strongly urge everyone to protect their capital by using stop losses.

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