Shareswatch Australia

It may appear to some investors that the Australian stock market has started 2012 in the same volatile manner as we have become use to over the last few years, however trading so far this year has been fairly calm.  An optimist might believe that this is an indication that the markets are finally settling down though I fear we are simply enjoying a period of calm before we enter a stormy phase again.

Recently the markets appear to have settled somewhat and the Australian stock market has steadily been heading higher so far in 2012. Could we be seeing the early signs of another bull market taking hold or are we about to see another sharp correction take the ASX All Ordinaries back down towards 4000 and perhaps lower?

Recently the markets appear to have settled somewhat and the Australian stock market has steadily been heading higher so far in 2012. Could we be seeing the early signs of another bull market taking hold or are we about to see another sharp correction take the ASX All Ordinaries back down towards 4000 and perhaps lower?

If you were to believe some of the ramblings on mainstream media sites you might get the impression that Australian stocks have on occasions bounced back strongly and that in some way this is a reflection of how well the Australian economy is doing. However the reality is that the Australian stock market has been trending downwards since July and many stocks are simply limping from one week to the next.

Prices for hard commodities such as copper, iron ore & coal have risen strongly over the past decade and are now trading well above their long term historical averages.  This in turn drove the ASX All Ordinaries Index to a bull market high in 2007 and has helped put some support under the market ever since.  But is it realistic to expect high commodities prices will keep propping up the Australian stock market?

Often it is useful to step away from looking at the daily movements of the stock market and review what has happened over the last decade.  This won’t exactly tell investors which stocks will do well during the next 10 years, but it does show which trends have moved the market to where it is now.

The Australian stock market is still a long way below the last market high reached in 2007 and so I can’t help wondering when we might see the ASX All Ordinaries reach a new market high.  Perhaps it will just be a few years time before the market recovers lost ground, or maybe it’s going to be a long wait before share market investors see stocks once again post gains year after year.

At the start of this year I had a somewhat bearish view of how the Australian stock market would perform during 2011 but the slump over the last few months has caught me by surprise.  Even stocks in the mining sector are being dragged down by global economic concerns at the moment and I don’t expect things to improve much this year.

Despite the best efforts of many analysts to talk up a stock market rally the Australian share market continues to move sideways with the ASX All Ordinaries and S&P/ASX 200 both unable push clear of the 5000 level.  But should this worry investors or is the market now simply reverting back to the long term trend?  Also what factors might be at play that are preventing a major market rally?

We are almost through a third of 2011 and the mood across global markets appears to be decidedly downbeat.  The bullish voices of late 2010 have now faded and even the Reserve Bank of Australia and Federal Treasurer are sounding cautious. But don’t be fooled by the talk that recent events have caused the global economy to face headwinds because the reality is that 2011 was always going to be a tough year.

Well today the stock market correction that I mentioned was coming in February has certainly hit and the ASX All Ordinaries Index has fallen below the 5000 level yet again.  Is this latest share market correction something Australian stock market investors should worry about, or is it simply an over-reaction to global events which will have little long term impact on stocks and shares?

Now that the ASX All Ordinaries Index has broken through and closed above 5000, more than a few market watchers seem to be quite bullish about the prospects for the Australian stock market.  But will the share market rally from here or will another correction roll along and push it below 5000 yet again?

Often lost in the debate about house and home prices in Australia is the discussion regarding if our national obsession with housing is good or bad for the overall economy.  Instead of rejoicing that residential real estate prices in Australia rose during the global financial crisis, maybe we should be looking a little closer at why prices are rising to see what problems this might be causing.

Now that 2010 is behind us, let’s look at some stock market charts for last year and see if we can pick up any trends that might be of some use  as 2011 unfolds. Do the charts reflect a booming Australian economy and set the scene for a bull market in 2011? Or should we be a little more cautious?

Over the last few months it has become increasingly difficult to write about the Australian stock market simply because not much has been happening.  During the last 12 months the market has basically moved sideways with just the occasional dip or rally to break up the boredom.

The Australian stock market has been trading in a fairly narrow range since hitting a yearly low in late May, however over the last few weeks it has pressed above 4600 and we could see it move further towards 5000 in the weeks ahead.  In addition some interesting trends are emerging in terms of gold, oil and gas prices and and they might be giving us a good indication of where the market is heading next.