Shareswatch Australia

For the last few years I have been warning that steps needed to be taken to prepare the Australian economy for when the commodities cycles would turn downwards. Back when I first started writing about this, it was almost considered treason to even suggest the mining boom may draw to a close. But these days even the RBA, Treasury and Wayne Swan are talking about the end of the commodities boom.

The Australian stock market has posted some good gains recently with the ASX All Ordinaries Index and S&P/ASX 200 Index both closing above 5100 yesterday. Instead of the markets showing some weakness as I expected, they appear to be rallying even despite falls in commodities prices and warning signs that the Chinese economy may start to slow again. This makes it difficult to get a feel for where the markets might be heading and economic stimulus measures in the United States, China and Japan complicate the outlook even further.

Since mid last year, the Australian stock market has staged a fairly impressive rally with the ASX All Ordinaries Index moving from a decidedly bearish level of down near 4000 to a bull market level of just under 5200 points. But of late the market has slipped back which will worry some investors, while others see this a simply a pause before the rally upwards continues.

Once again it is time to dust off the crystal ball, stick a finger in the air and toss some chicken bones over my shoulder in a vain attempt to forecast what the Australian stock market will do in 2013.  Last year the ASX All Ordinaries and S&P/ASX 200 posted respectable gains, but will they do so again this year?

The Australian stock market closed up again today with the ASX All Ordinaries Index finishing at 4550.90 points – a rise of 0.82% for the day.  The last couple of months have been generally kind to Australian stocks but we need to keep this recent stock market movement in perspective.

The Australian stock market has been as exciting to watch over the last month as a Julia Gillard speech.  Over a few days stocks grind out modest gains and then when bad news roll in, the gains are basically given up and the market slides back down again. But if we scratch under the surface and look at some candlestick charts these may help us understand what is driving this type of share market trading.

The last month or so has been quite a ride for Australian stock market investors with the ASX All Ordinaries Index falling from around 4500 points to around 4000 points.  The continuing economic woes in Europe, the economic slowdown in China and the stagnant U.S economy have worked to drag the share market down as have signs that the Australian domestic economy is showing signs of weakness.