Upfront Investor Australian Share Market Report 3/9/10

This week world markets have risen strongly mostly on the back of the US Federal Reserve saying it will take steps to stimulate spending, if required. Seriously, I can’t help but think that the current rise is really just the calm before the storm, particularly given that the US spent trillions on the last rescue package which had little effect and was more akin to putting a bandaid on a shark bite. All reports from the US indicate that their economy is looking weak and getting weaker. Given this, I believe the news this week was, once again, a result of the US sticking their head in the sand about the real depth of the problems they face, and as they so often do using the Federal Reserve to manipulate the markets into thinking everything is fine.

If any individual or business had the balance sheet of the US Government they would have been forced into bankruptcy many years ago and the same can be said for many other countries in Europe. Whilst I appreciate that the finances of governments and countries are different to individuals or business, any child knows that you cannot keep spending more than your earn. The US needs to bite the bullet and do some serious work to reduce its debt levels, otherwise a double dip recession will occur in the not too distant future. Luckily Australia is not in this situation as our debt levels will be eliminated over the next few years no matter who is in government, and we are strongly connected to Asia and not the US or Europe which will shield us somewhat from any meltdown in the US.

So what do we expect in the market?

The announcement by the US Federal Reserve on Monday saw the market rise this week rather than fall as expected. I believe this has only served to delay the inevitable and as such I expect that over the next one or two weeks the market will once again start to fall into the low that I mentioned in my previous reports.

You will remember that my target for the low on the All Ordinaries was between 4200 and 4000 points and likely to occur between 13 and 20 September. Whilst my price targets have not changed, it is possible that the time of the low could now extend to between 17September and 1 November. These dates coincide with when I would expect the Dow to have its next low with the fall on the Dow likely to be between 8,900 to 9,400 points. Of course anything is possible in this market as we could be seeing the start of the next bull-run, however, I would caution that now is not the time to get excited until we can confirm the direction of the market, which I believe we will be able to do in the next couple of weeks.

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