Share Market Wrap 4th July 2008
The price of oil continues to rise, but the question on most people’s minds is why is it going up and how far will it go? In my opinion, it has nothing to do with the laws of supply and demand and everything to do with speculators pushing the price higher. As we all know, speculation drove the tech boom, which resulted in companies trading at prices well above their true value, and the same can be said for oil.
How far the price of oil will rise is anyone’s guess but what I do know is that just as the tech boom came to an end so will the oil boom. And when it does the price will fall considerably with my early estimates being to around $70 a barrel. The good news is that I believe the price of oil will peak this year, which will see oil prices fall away over the next one to years resulting in cheaper petrol making many motorists very happy.
So what can we expect in the market?
The market has achieved many new milestones in the previous 12 months, most of which have not been good for investors. The only positive milestone was that the market made a new all time high in November 2007, however, since then it has fallen around 26.24% making it the largest fall in 20 years.
Yesterday the All Ordinaries Index fell below the March 2008 low and in doing so confirmed that the normal 4 year cycle on our market has now stretched out to well over 5 years given that the last 4 year low occurred in March 2003. Given this, I now firmly believe that the market will continue to fall to find support around 4800 points, which if you remember was my original target for the 4 year low from mid last year. As we have now entered the time period for the yearly low, I believe this low will occur any time now up to around mid August.
Once again, I urge investors to be patient because when the market turns bullish there will be some great opportunities to be had.
Dale Gillham
Chief Analyst
Wealth Within
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