Share Market Wrap 19th Oct 07

With the ASX launching its new listed CFD product in November, there has been an influx of attention in the media with many suggesting that the demand for this product will be strong. Not surprisingly there has also been an increase in advertising from other providers, no doubt, in an effort to maintain market share. But the question that has to be asked is this product really suitable for retail investors? Trading CFDs is very high risk and should only be contemplated by those with the required knowledge and skill in trading and in handling highly leveraged instruments. Some of the providers promote they offer education but you have to question how good is it when the average CFD trader only lasts a matter of weeks in the market. In my opinion, the education is used as a lure to attract clients, rather than to genuinely educate them. This was prevalent when options and warrants were introduced into the market, and we may just see a repeat of the providers coming out on top and the mum and dad investors left wondering what just happened.

So what can we expect in the market?

Last week I indicated that I was expecting the market to fall by a few per cent over one or possibly two weeks in order to bring some normality into our market. Since last Friday, the market closed lower up until Wednesday falling less than 1.5%. Yesterday, in a surprising move it rose strongly to recover what it had fallen in the preceding four days. While I expected the market to rise slightly on Thursday before falling away again into next week, it now remains to be seen if the recent strong move has just delayed the fall I have been expecting. While the market will generally be bullish through to late December or possibly early January, I still believe it needs to fall over one or two weeks in the very near future.

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