Share Market Wrap 10th October 2008

I believe the one per cent interest rate cut by the reserve bank announced this week was a positive move as it will underpin the longer-term stability of the Australian economy. The decision by the major banks to pass on the majority of the rate cut to home lenders is also likely to relieve the mortgage stress experienced by many Australian in the short term. However, unless Australians cut back on the increased debt that the country is accumulating, I believe the financial relief will be short lived.

As a country we are now firmly in a negative savings pattern given that we borrow more than we earn. And with Christmas fast approaching it is highly likely that credit card debt will skyrocket, as many Australians use the surplus cash to squander on the festive season, which will further compound the problem. In my opinion, unless Australians begin to curtail their debt in the coming years, we may well find ourselves in a similar situation to that currently being experienced in the US.

So what can we expect in the market?

The All Ordinaries Index has continued its decline moving down to 4249 points before rising slightly to close just below my expected support level of 4300 points yesterday. Despite the fact the sentiment in the market is quite bearish I am confident that the market is searching for the bottom right now. Once it is confirmed, I believe the market will rise strongly to at least 5500 points over the coming months although it is possible it will rise to around 5800 points.

That said, we need to be cautious right now as it is possible the market could rally for two to three weeks before falling into a short term low around 4 November which may result in the market trading to a low of around 4000 points. Remember the US election occurs on 4 November, and leading up to this event we may experience uncertainty in the US market, which will most likely impact global markets. Irrespective, I believe we will see a change in the US government, which I believe will be a positive move and spur the US market back into positive territory.

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au

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