Share Market Wrap 11th July 2008
There is an old saying that the darkest hour is just before dawn and this is, at times, a very appropriate phrase when referring to the share market. In October 1997 experts were predicting a global meltdown as a result of the Asia crisis, yet our market rose 40% over the next two years. The same situation arose following the tech wreck in 2000, yet our market rose over 18% the following year.
Following the September 11 crisis, experts where once again predicting doom and gloom for the world economies, but our market only fell around 6% over the next 18 months into March 2003. Since then, we have had the biggest bull market in history, therefore the pull back in the previous 12 months is a natural process whereby the market is simply adjusting to more realistic levels. Since the Asia crisis our market has risen nearly 130%, despite three major events that were predicted to have enormous impact on our economy. The question that remains then, is it time to buy? Not yet but it is getting pretty dark, so be prepared.
So what can we expect in the market?
Over the past seven weeks the market has been in a sustained down move, with the All Ordinaries falling to a low of 4999 on Thursday 10 July. The last time our market fell for a prolonged period was the eight-week fall into the March 2003 low. Given this it is highly likely that our market will rebound over the next one or two weeks.
While it is possible the rebound will signal an end to the current market fall, I believe it is likely to be short lived as I am expecting the market to fall away one more time to exhaust the current downtrend to eventually find support around 4800 points. While I would urge investors to remain patient, I believe it is time to get ready to take advantage of the next bullish move, which will occur in the not to distant future. As I have indicated previously, I still expect the second half of this year to produce good profits for those who are patient.
Dale Gillham
Chief Analyst
Wealth Within
A few weeks ago I indicated that the rising price of oil was based more on speculation rather than supply and demand. I also pointed to the price of oil peaking this year, with prices likely to fall over the next one to two years to around $70 a barrel. In the last two weeks the US government has introduced plans to reduce the speculation on oil prices, which has subsequently seen the price of oil fall. While it is still too early to confirm whether oil has peaked, the signs are very encouraging. If it does start to move down I don’t believe it will be a swift retreat, rather I expect it will be steady decline over the next 12 months.
So what can we expect in the market?
Last week the All Ordinaries index fell to a low of 4880 on Wednesday 16 July, and has since risen strongly to reach a high of 5209.60 as of Wednesday 23rd July. Whilst the fall was close to my target of 4800, I am not convinced that the fall is over. My current expectation is that the current move up will last between one to four weeks before it finds any resistance, although in my opinion the longer the upward move the better.
For the market to prove it is bullish again, we need to see it hold above 4880 points. While it will fall away to test the recent low, the move down needs to be short lived. Currently the medium term direction of the market is uncertain, as it is still possible it could fall away to trade around 4300 points, which is the next support level on the All Ordinaries Index.
Remember, until the market proves it is bullish, we need to assume that it will continue to be bearish. Given that the market has yet to prove it is bullish, is it is far safer to sit and watch it unfold before making any decisions. Once the market confirms it is bullish there will be many opportunities to profit in top blue chip shares during the remainder of the year. Right now I encourage investors to sit tight.
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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