Upfront Investor Share market wrap 10-07-09

http://www.youtube.com/watch?v=bTetayuv-Mc

The issue confronting a lot of Australian’s right now is whether or not to fix interest rates on their housing loans. The banks have already raised their fixed interest rates potentially in an effort to entice home owners to lock in a rate now before they rise again. So should Australians be looking at locking in a fixed rate? To answer this, let’s look at where interest rates are heading over the coming years? Given that economies run in cycles, if we review the historical movements in the RBA rate rather than economic forecasts, we can ascertain that the official RBA interest rate is unlikely to move above 5 per cent before 2013, with it more likely to fluctuate between 3 and 5 per cent. Given that banks generally fix their rates at between 2 and 3 per cent above the official RBA I don’t believe it would be worthwhile in the short to medium term for home owners to lock in their rate unless they are seeking ways to better manage their cash flow. From a cost perspective, I think variable rates are the way to go given the savings that home owners will receive with the lower variable rates available, the flexibility they offer and the low probability of rates rising significantly in the foreseeable future. So what can we expect in the market? The past week has certainly been interesting in the market. While it was slightly bearish, the market has really gone nowhere although we are starting to see signs that the All ordinaries Index is finding support and turning to move back up again, but this is yet to be confirmed. If I am correct, the market should rise up next week in a more definite move although this move is likely to be short lived and may not break the previous high of 4078.3 points achieved on 15 June. That said I still believe the market will move up to my target of between 4200 and 4600 by late July or possibly the first week of August. Predicting the market or individual shares for that matter on a consistent basis is not an exact science but one based on probabilities, therefore we need to plan for the worst and hope for the best. As each day unfolds new information comes to hand that can effect our outlook, therefore as I have said before it is critical for investors and traders when managing their portfolios to use stop losses and to not get complacent with the current bullish move that started in March, believing it will last forever. Dale Gillham Chief Analyst Wealth Within