Share Market Wrap 8th Dec 06
Between 7 November and 7 of December the All Ordinaries Index rose 53.10 or 0.8% given that the market fell 153.3 points or 2.71% over 9 days, only to rise back up over the next 9 days 100% of what it fell. Over the last 5 days it has closed lower than it opened on 3 of these days and today (Friday 8 Dec 06) it looks as though it will close lower again.
So what is this telling us? Over the last month the market has really only traded sideways rather than fall as I have been expecting, which indicates there is uncertainty in the market. While the volatility is unlikely to impact those who trade over the medium to longer term, the story is quite different for those who trade options, warrants and CFDs with little or no knowledge or understanding of the risks these markets represent. In fact I would suspect that many would have been whip sawed in and out of the market over the last month, and despite their vein efforts to make money, I believe many would have lost.
So what’s happening on the market this week?
Given that the market has traded sideways rather than down as I anticipated, my view of the future is changing. Right now the market is consolidating and given that it has been bullish we need to assume that the move out of the consolidation will also be bullish. If this occurs I believe the next move up won’t last long as there is a high probability of the market falling into a yearly low in the first part of 2007. That said if the All Ordinaries Index does fall below the low of 5400.10 achieved on 4 Dec 06 over the next week, then the probability of the market continuing to fall increases dramatically, with it likely to fall to at least 5300 points.
While it is becoming less likely that the All Ordinaries will fall to reach my original target of between 5200 and 5000 points, if a number of the big stocks like BHP, RIO and TLS (all of which are all looking weak right now) fall away this could be a very real possibility.
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