Share Market Wrap 18th April 08

Everyone enjoys the market when it is bullish because it is generally easier to generate positive returns without too much effort. It is not until we experience the events of the past 9 months do we really regain our respect for the share market because we tend to fall into a false sense of security believing the bull run will last forever.

In the past 4 months, many shares have fallen heavily including Centro, ABC Learning Centres, Allco, Tattersals and Tabcorp to name a few, falling as much as 50% or more. Unfortunately many investors have continued to buy more shares in these companies in an attempt to dollar cost average their returns only to see the stock fall away further. What concerns me about his is that most of these stocks provided signals to exit a minimum of 6 to 12 months prior to falling heavily. Therefore, this trend suggests that investors need to educate themselves in how to sell shares so as to preserve their capital given that these stocks will need to double in price for the investor to simply break even on where they were 12 months ago.

So what can we expect in the market?

On Monday the market continued to trade down as expected, however it quickly found support and turned to rise over the next 3 days which is a very positive sign. That said this could simply be a move counter to the recent downtrend rather than a new uptrend emerging. If this is the case, the market will start to fall away again any day now, and given that the US is currently in the middle of reporting season, it is possible that any unexpected news will increase the likelihood of the market falling away.

Even though there are some positive signs emerging, I suggest people sit tight until we can confirm the direction of the market. If the market is bullish, it needs to rise above 5697 in the next one to two weeks. As I have previously indicated, however, probability still suggests that the market will experience further falls in the short term.

Dale Gillham
Chief Analyst
Wealth Within

Social bookmarking: These icons link to social bookmarking sites where readers can share and discover new web pages.