Shareswatch Australia

A quick glance at most of the headlines over the weekend and the primary focus seemed to be either calling a near term top in domestic equity indices or a focus on the Greek debt situation. Why is anyone even paying attention to what is going on over there? Until the ISDA declares a default where the underlying Credit Default Swaps (CDS) are triggered, it is all just noise.

Friday morning traders and market participants awaited the key January employment report from the U.S. Bureau of Labor Statistics. The reaction to the supposedly wonderful report was a surge in the S&P 500 E-Mini futures contracts as well as several other key equity index futures.

Over the recent couple months the precious metals charts have made some sizable moves. Most investors and traders were caught off guard by the sharp avalanche type selloff and lost a lot of hard earned capital in just a few trading sessions. Gold dropped over 20% and silver a whopping 40%.

The continuing debt crisis in Europe is a reminder to investors that we are still in the midst of the Global Financial Crisis (GFC) which first gripped the markets back in 2008.  The G20′s first cunning plan to spend their way out of trouble didn’t do much to fix the root causes of the GFC and so they are gathered once again for another talkfest which at best, might give the markets a kick upwards for a few days.

Over the last six months stock markets globally have become more volatile as Europe and the U.S. struggle to revive their economies.  To make things more complicated many advanced economies have racked up so much debt during the ‘good times’ that they now don’t have the capacity to spend their way out of trouble.  There will be no quick fixes and the situation is worrying enough to even rattle the commodities bulls.

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 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?

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?

Yesterday the ASX All Ordinaries finally closed above 5000 and many stock market investors will now be wondering if this is the start of another period of rising stock prices, or simply the prelude to another downwards correction. Well the answer to both questions  in my opinion, is yes.

As the end of the year approaches it is time once again to contemplate how stocks may perform over the next 12 months. There are plenty of views around of course that range from the super bearish (i.e. there will be another stock market crash) to super bullish, (i.e. markets will surge to dizzying new heights) but I will steer clear of both extremes. So at the risk of being very wrong, very soon, let me now underwhelm you with my outlook for the Australian share market in 2010.

Over the last few weeks I have found it difficult to write much about the Australian economy or stock market simply because events have pretty much unfolded as I guessed they would some months ago. Despite the hype from the Reserve Bank of Australia (RBA) and some sections of the business media the fact is that the Australian stock market is still trading around 30% below the highs of 2007.

The Australian stock market has finally rallied back up to where I believed the bear market bottom was last year but although this is a positive sign, the Australian economy faces a number of challenges in the years ahead and these might well make it difficult for the market to surge ahead in 2010 and beyond.

Well September passed rather uneventfully as far as the stock market was concerned although in the last few days, it has pulled back somewhat. However the overall trend is undoubtedly upwards and this looks like it will be maintained for the rest of the year. Despite plenty of gloomy views the bull market lives on, at least for now.

Here we are in the dreaded month of September and yet stocks are still on an upward trend. But as each day passes the bulls become more bullish and those suggesting a major correction is due become more adamant that this rally cannot last. So who might be right?

The ASX All Ordinaries Index has rallied around 40% since hitting a low in March this year and so investors are starting to wonder if a market correction is on the way. The simple answer is yes, because the fact is there is always some form of stock market correction just around the corner.

As of today the Australian stock market has rallied just over 30% since bottoming out in March and so it is looking likely that the worst is over as far as 2008-2009 stock market rout is concerned. However the market is still well below the highs of 2007 and so a full stock market recovery is still a long way off.