Caution for our markets

Published in the Daily Telegraph, June 2009 by Jenny Dilion

The downward trend experienced in markets last week will last for at least another week before turning upward again, according to Wealth Within chief analyst Dale Gillham.

He believed the market would get as high as 4200 to 4600 by late July.

But at the moment, it is tracking the US markets which have gone into cautious mode after a period of optimism.

The Dow Jones Industrial Average took a breather on Friday with no major economic or corporate news and the index felt 15.87 points, or 0.19 per cent, to 8539.73.

The Nasdaq gained 19.75 points, or 1.09 per cent, to 1827.47 while the broader Standard & Poor's 500 index rose 2.86 points, or 0.13 per cent, to 921.23.

Over the week to Friday, the Dow Jones Industrial Average had fallen 2.95 per cent to 8539.73, bringing to an end a four-week rising streak.

Earlier, the Australian share market ended higher on Friday with the benchmark S&P/ASX200 index rising 7.5 points, or 0.19 per cent, to 3899.6 points, and the broader All Ordinaries index up seven points, or 0.18 per cent, to 3894.4 points.

But the September share price index futures contract pointed to a fall in the local market on Monday, after finishing the overnight session on Friday at 3863, down seven points.

The coming week is expected to be volatile, with concerns over activity in the US, specifically the two-day meeting of the US Federal Reserve's monetary policy body and fears that recent rises in stock prices may have been too exuberant.

Similar fears are emerging for Australian markets as the end of the 2008/09 financial year approaches and worries grow about the next corporate profit reporting season in August.

"Now is not the time to take on any debt to invest in the market," Mr Gillham said.

"I believe the market will turn bearish again in September."

AMP chief economist Shane Olives said there were short-term worries about the impact of higher mortgage rates and oil prices, capital raisings, rising unemployment and the strength of the recovery.

"All are likely to ensure that the ride for (Australian) shares over the next few months will be more volatile than the last three months have been," Mr Oliver said.

"Note also that the period from now to September/October is often rough for shares.

"Selling shares to lock in capital losses may be an additional potential negative for the Australian share market in the run up to June 30."