Market to fly

Published in the Daily Telegraph, October 2009

The sharemarket is likely to open higher today after US shares put on an optimistic performance on Friday.

CommSec chief economist Craig James expects the market to open 15 to 20 points higher.

"Certainly we have got a positive lead in from Wall Street," he said.

The Dow Jones index climbed 78.1 points, or 0.80 per cent, to finish the week at 9864.9, while the broad indicator, the S&P 500, added 6.01 points or 0.56 per cent to 1071.49 and the Nasdaq 15.35 points to 2139.28.

The Australian sharemarket closed slightly lower on Friday as investors took profits amid nervousness about the strength of companies reporting their financial results in the US.

The benchmark S&P/ASX200 index fell 15.7 points, or 0.33 per cent, to finish the week at 4752.9, and the broader All Ordinaries index dropped 8.8 points, or 0.18 per cent, to end the week at 4754.5.

But weekend base metal price falls were expected to weigh on the local market, Mr James said.

"The banks will hold up quite well, but there may be some softness among the mining stocks."

The focus for investors this week would be on a speech by the Reserve Bank of Australia governor Glenn Stevens on Thursday, Mr James said.

"There maybe a degree of caution in the market on Monday.

"We do have the RBA governor speaking later in the week and I don't think investors would want to get too far ahead of themselves before he speaks," Mr James said..

"Also it is the start of the US profit reporting season and there are a number of major companies reporting over the week. Uncertainty about those reports may hold the market back somewhat."

Wealth Within chief analyst Dale Gillham painted a cautious picture for the market.

"While I expect the market will now rise for the next one to four weeks to between 5000 and 5200 points, all is not rosy," he said.

"Generally when the market fails to fall when a low is due, this often results in any future correction being more severe. Given this, I would not be shocked if, during the US reporting season, we get some surprises which cause the market to fall away strongly into a low in November or December.

"Depending on how far the All Ordinaries index continues to rise over the next few weeks, the market could fall to as low as 4200 points.

"Right now I believe it is safe to continue holding shares in the market at least in the short term.

However, I strongly urge everyone to protect capital by using stop losses."

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