Share Market Wrap 16th Nov 07
We have now entered the last week of the election campaign, and I believe no matter who wins there are two things that will occur for sure. One is that inflation will rise and the other is that interest rates will continue to rise.
Up until now the rising Australian dollar has protected the economy from any significant inflationary increases given that it has risen 20% against the US dollar since the start of this year.
The strong Aussie dollar has also kept petrol prices down despite oil rising around 50% this year. Over the two last weeks the Australian dollar has fallen over 6% against the USD, and whilst this fall my be short term my concern is the effect it will have on inflation, interest rates and the overall Australian economy if it continues to fall for a prolonged period.
So what can we expect in the market?
The All Ordinaries Index fell into a low of 6503.80 points last Tuesday, before rising strongly on Wednesday. It then rose early in the day on Thursday before falling away and it continued to trade down on Friday.
As you know, I am expecting the market to be bullish until around Christmas and given that it has already traded down for two weeks I am expecting it to rise this week. To confirm that the market will be bullish, it needs to stay above the low of 6503 from last Tuesday.
If the market falls through the low and continues down this week, it is possible that the market will fall until Christmas. Right now only time will tell but if I am correct and the market does rise, it will rise quite fast and present some great opportunities.
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