Time to take a profit from fall

Published in the The Bullring, August 2012 by Dale Gillham

This past week we have seen our banks post what some might call obscene profits, yet at the same time we are seeing weekly news of Australians losing jobs (including bank staff), companies going into liquidation, rising mortgage delinquency rates and the mining industry slowing down.

So is Australia in a two speed economy?

It certainly looks like it: one where there is one economy for the banks and one for everyone else.

This has never been more evident, especially when you consider that the banks failed to fully pass on the RBA's last rate cut, citing, among other things, rising costs.

I am all for profitable business and, especially, profitable banks, as this lends stability to our economy and share market. 

However, I would argue that banks have an unhealthy stranglehold on Australians.

After all, everything we do involves a bank somewhere along the line, either via credit cards, bank accounts, or home or other loans.

Banks know if they make it easy for us to borrow money, the more we get into debt to buy our house, car or other items we desire.

He who has the money makes the rules - and the rules always suit the man with the money, so he can make more.

So what do we expect in the market?

Even though we have seen some mixed news in our market this week, it has continued to move up, reaching a high of 4430 as of' writing.

This is the fourth straight week that our market has risen and 11 weeks since our last low.

While this is good news, markets don't continually rise, just as they don't fall continually.

It is for this simple reason that I would not be surprised to see the market start to fall away in the next few weeks.

That said, I would like to see the market move through resistance at around 4500 points before the fall, as this would auger well for further rises beyond a short decline in September/October.

Right now might be a good time to look for weakness in the market to take some profits, especially if the 4500-point level is not broken.

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