Share Market Wrap 19th Jan 07

Last week I outlined the market conditions that tend to unfold at the completion of a bull market including rising interest rates, low unemployment, high levels of consumer borrowing, rising commodity prices and abnormally high rates of takeover bids and acquisitions. In the past week I have lost count of the number of takeover speculations – it’s like the who’s who of the share market. BHP is rumored to be looking at Oxiana, Macquarie is looking at the ASX and Babcock and Brown are considering a takeover of Alinta. Other takeover targets include Wesfarmers, Coles, Symbion and David Jones. To top it off, there is talk of yet another interest rate rise and right now institutional investors are reweighing their portfolios by pulling out of the resources sector and moving to safer ground. So the question we need to ask, is this really the beginning of the end of the bull market?

So what’s happening on the market this week?

Last week I indicated that the market would rise up to make a new all time high in the short term, which it did this week achieving a high of 5678.7 points on 16 January before falling to close back where it opened for the day. Interestingly this new high was only 7 point higher than the previous all time high on 3 January. Right now there is short term indecision in the market, as it has traded sideways since the all time high although I believe this indecision is only temporary. For the bull market to continue we need to see the all time high broken by a significant margin. That said, given that we are due for the yearly and 4 yearly low in the first half of this year, the market may fall away rather than rise although I am predicting that the market will rise and most likely peak in April or May before falling away. Given this, now is the time to be conservative rather than aggressive.

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