Share Market Wrap 24th Aug 07

ASIC is finally investigating internet stock forums based on allegations that a number of members are ramping shares. In my opinion this investigation should have been undertaken many years ago, but as they say it is better late than never. Based on my experience internet trading forums are a bit like the blind leading the blind, a fact which opportunists know and use to their advantage. Despite the publicity surrounding illegal scams, people still get hooked in the hope of making money and people join online chat forums for the same reason; so it’s no wonder people lose money.

I know many experienced traders and none visit these types of forums, and for good reason. As I have always said, the only way to be consistently profitable in the share market is to get a solid education from experienced professionals that are focused on you achieving your financial goals. So what’s happening on the market?

The market has behaved quite erratically over the last two weeks, which is very abnormal for the Australian market. The large fall last Thursday was unexpected and the strong rise over the past 4 days, as the market rebounded, has also been a surprise. That said, I indicated last week that I expected the market to rise, however, I believed it would take a couple of weeks to rise up to its current levels. Even though the market has risen strongly out of the low of last Thursday, we are yet to confirm it has stopped falling. This is obviously very important if you are considering any new positions in the market; therefore caution needs to be exercised as there is still a high probability that the market will fall further, particularly as I am still expecting the 4 year low that I mentioned in my last report. It is possible that what we have seen over the last few week is the start of the fall into the low, which if correct means the All Ordinaries Index could move down to around 5000 points over several months, but again this is not confirmed. For now it is better to sit back and take a wait and see attitude until we can confirm the medium to longer term direction of the market.