Shareswatch Australia

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?

The ASX All Ordinaries Index and S&P/ASX 200 Index finished much lower than I expected in 2011, so this makes me somewhat reluctant to go on record and make an Australian stock market forecast for 2012. However the process of looking at the various economic data and trying to guess where the market will end is a useful one, so foolishly I will outline once again my Australian stock market forecast for the year ahead.

The interest rate cut yesterday by the Reserve Bank of Australia suggests that finally the RBA understands that the Chinese economy will not keep expanding at a rapid rate while its major trading partners are struggling. But even if the Chinese economy slows more than most economists expect this is unlikely to send the global economy back into a GFC-like slump.

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.

This week was quite a ride for stock market investors with the ASX All Ords and ASX 200 both trading at one stage under 4000 points.  However as the week progressed the markets started to claw their way back up and things are not quite as worrying as they were a few days ago.  What investors will be trying to work out now is if the stock market rout is over, or is it just having a rest before it once again sends stocks falling?

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.

Over the last few weeks the tragic events in Japan and the political unrest in the Middle East have shown just how fragile the Australian stock market is. Investors appear ready to move quickly out of shares and shift funds to less riskier assets when they sense trouble. This suggests to me, that people don’t quite believe that the Australian economy is as robust as many market commentators would have us believe.

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?

As another year starts it’s time for me to make another stock market forecast, one which I will probably regret making in just a few months time. Generally speaking, I expect that 2011 is not going to be particularly kind to the Australian economy and therefore my Australian stock market forecast is not going to make market bulls very happy.

As the year has progressed I have noticed that my view of the Australian stock market and economy has become increasingly at odds with most of the mainstream market commentators back in Australia.  Whereas they see reasons to be optimistic and feel the economy is robust, I feel the situation is quite different and believe the Australian economy is dangerously unbalanced and possibly primed for a nasty correction.

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.

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Despite a fairly nasty stock market correction over the last few weeks the Australian market did not fall anywhere near the lows of March 2009 and as I have been saying for nearly a year, we won’t see those levels again for some time,  if ever.  So now that the market correction appears to be over, what are stocks, oil and gold prices likely to do during the next few months.