Share Market Wrap 16th March 07

Many people are asking why we have seen a number of large movements in the market over the last few weeks and the simple answer is because of the Hedge Funds or Institutional trading and the other is because of an over use of leverage by many investors. The recent falls that occurred on the Chinese and American markets provided the Hedge funds with a way to push the market in their favour, based on the fact that overreaction on our market would create a fall large enough that the hedge funds could easily profit from. This in turn caused traders, who were highly leveraged in the shares that were falling, to sell which made the market fall even further resulting in the hedge funds profiting even more. Shares like BHP, RIO and PDN, to name a few, were all targets and unfortunately over the last few weeks many individuals have lost large sums of money to the big end of town as they tried to trade these shares.

So what’s happening on the market?

In my last report I mentioned that if the market fails to make a new all time high over the next three weeks, it was likely that the current all time high of 6024.7 on 23 Feb could be the yearly high and possibly the four year high that I have been expecting. Given the weakness on our market this week, it is looking more likely that we may not see a new all time high emerge, which if correct means the market has a higher probability of falling over the coming weeks. If this occurs it is highly likely that the market will fall below the recent low of 5626.90 on 6 March. That said although it is less likely that the market will recover to rise above the previous all time high it is still possible.

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