Share Market Wrap 15th June 2007

A research paper recently released by Inalytics indicates that most fund managers fall into the same trap as individual investors when it comes to shares by selling winning investments and holding on to underperformers. It seems that the majority of fund managers are optimists, spending more time buying stocks rather than managing their positions to sell at the right time, which explains why the majority of fund managers fail to outperform the index. It is common for investors to sell winning stocks because they fear taking additional risks with stocks in which they have already made money, which also appears to ring true for fund managers. Given this, you have to ask why investors would pay to invest their money with these so called’ experts? In my opinion, unless the fund managers learn how to time the market by selling losers to hang onto winners, they will continually under perform the index.

So what is happening on the market?

After reaching a new all time high of 6435.05 on the 4^th of June the market fell away 3.59% over the next 6 days into a low of 6200.10 on Wednesday this week. Yesterday the market rebounded strongly rising nearly 80 points and it has continued to trade up today. In my last report I indicated that with the current indecision in the market, anything was possible and that the All Ordinaries could trade above its recent highs. The market is obviously rising right now to test the all time high, which is normal as markets will generally test major highs and lows before deciding on a direction. What happens over the next few days will confirm whether the pull back I have expecting is unfolding or whether the market is still bullish. Given that I believe the market is moving into its yearly low, I suspect that we will see some weakness in the market either today or Monday which will see the All Ordinaries fall away. If the market continues to move up over the next week it will need to break strongly above the all time high of 6435.05 for my opinion to change. If I am correct and the market falls away, I expect it will fall into mid July and below 6000 points.