Wait till market is bullish

Published in the Geelong Advertiser, July 2008 by Dale Gillham

A few weeks ago I indicated that the rising price of oil was based more on speculation rather than supply and demand.

I also pointed to the price of oil peaking this year, with prices likely to fall over the next one to two years to around $70 a barrel.

In the last two weeks the US government has introduced plans to reduce the speculation on oil prices, which has subsequently seen the price of oil fall.

While it is still too early to confirm whether oil has peaked, the signs are very encouraging. If it does start to move down I don't believe it will be a swift retreat, rather I expect it will be steady decline over the next 12 months.

Last week the All Ordinaries index fell to a low of 4880 on July 16, and has since risen strongly to reach a high of 5209.60 as of July 23.

Whilst the fall was close to my target of 4800, I am not convinced that the fall is over. My current expectation is that the current move up will last between one to four weeks before it finds any resistance, although in my opinion the longer the upward move the better.

For the market to prove it is bullish again, we need to see it hold above 4880 points. Remember, until the market proves it is bullish, we need to assume that it will continue to be bearish.

Given that the market has yet to prove it is bullish, is it is far safer to sit and watch it unfold before making any decisions.

Once the market confirms it is bullish there will be many opportunities to profit in top blue chip shares during the remainder of the year.

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