Will the Stock Market Trade Out of its Sideways Move?
By Dale Gillham |
Last Thursday, ASIC released a statement banning the sale of binary options, which will take effect from Monday the 3rd of May this year after they found that these products had resulted or may result in significant detriment to retail clients.
Binary options banned in Australia
If you are not already aware, binary options allow you to place an all or nothing bet on the price movement of an underlying instrument or asset, such as a currency pair in Forex trading. In short, you either get a fixed amount of cash or the underlying asset or nothing at all if you lose, which is why this product is like betting at the races. In coming to its conclusion, ASIC conducted multiple reviews that found approximately 80 per cent of retail clients lost money trading binary options because of their product characteristics.
ASIC estimated that the net losses suffered by retail clients trading binary options in Australia was around $490 million in 2018 although this reduced significantly in April 2019 after ASIC issued a warning against several providers located in foreign jurisdictions who were delivering unlicensed or unauthorised services to retail clients.
While I applaud ASIC for banning binary options, I wonder why this took so long given that it has been a well-known fact for a very long time that binary options have been prone to fraud and had already been banned in other countries.
Many years ago, I received phone calls from retails investors looking for help because they had lost money trading binary options. Unfortunately, they had been caught out by misleading information and providers using credible and well known people to falsely endorse these products. And this behaviour is continuing today but now it is in crypto markets.
That said, I am not suggesting that all cryptocurrency sites are misleading, it’s just that investors need to be aware that if something sounds too good to be true, it probably is, which is why it pays to do your research. Anything that promises instant riches or guaranteed returns without any knowledge is something that should be avoided.
What were the best and worst performing sectors last week?
Industrials was the best performer last week up 1.55 per cent followed by Materials up 1.38 per cent and Information Technology up 0.39 per cent. The worst performing sectors included Energy down 1.80 per cent followed by Utilities down 1.77 per cent and Healthcare down 1.40 per cent.
The best performers in the ASX/S&P top 100 stocks included Boral Limited up 6.74 per cent followed by James Hardie Industries up 5.11 per cent and Mineral Resources up 4.46 per cent. The worst performing stocks included Appen down 6.45 per cent followed by AGL Energy down 5.81 per cent and JB Hi-Fi down 5.47 per cent
What's next for the Australian share market?
After looking a little stronger the week prior, the Australian stock market displayed indecision once again finishing the week just 1 point higher than it had closed the week before.
While I said last week that the strong move up in the week prior was good news, it was not enough to change my opinion from being bearish to bullish, as I still believe probability suggests that the market should trade lower in the short term.
That said, the way the All Ordinaries Index is unfolding right now, I have not discounted that it may rise from its current levels. I am just being conservative, as it is better to plan for the worst and hope for the best. For me to change my mind, the All-Ordinaries Index needs to rise and trade above 7,200 points.
For now, good luck and good trading.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.