I actually think the Australian market is in pretty good shape, but I think its futile telling the market that. I think the market is looking for reasons to touch 4880 level support.
I think there is the possibility the market will touch 4880 pts, but the ASX will finish the week above 5000 pts. Resources will be the biggest source of strength, as well as food & farming-related stocks.
The justification for reaching that level will be the prospect of a number of interest rate increases in future and the impact that will have on domestic spending. Technically the market is just not ready for a move above 5300 pts since last week it was repealed trying to break that level. I would however be particularly interested to see how the market opens in Australia because the market did not close above its previous low. If it opens strongly I take all that back. You will get very early guidance on this one. Just checking the Dow Jones Index. It was up 120 pts earlier, but now I see its just up 21 pts, placing it slightly below 12,000 pts. Thus I see broad weakness with strong resources, particularly gold.
Mining companies are looking at healthy metal prices irrespective of the strong $A. We will be looking at parity between the $A and $US, so dont even think about exporters or companies with a significant portion of their earnings derived from offshore. The best performers will be the gold producers, but with the greatest gains coming from the emerging producers rather than the established miners which have found support in the market already. So check out my
Specs blog. This is buying time people in gold, silver, palladium and platinum. Not oil at this point, and selectively with other metals and coal.
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Andrew Sheldon
www.sheldonthinks.com
Investment Strategy
If you are investing for the long term, you still need an investment strategy. Dont be fooled by the rhetoric of fund managers. The reason they advise you to 'buy & hold' is because they dont want to compete with you in sell-offs. Markets and industrial sectors are cyclical, so they demand trading to get the best returns. Fund managers actually cant hope to match the performance of small investors (if you are half good) because they have to manage huge amounts of funds and charge you a fee besides.
MY ADVICE is (i) look at a range of market indices and decide upon what level of correction would give you the justification you need to get in & out of the market. It might be a 5-10% retracement or a break of trend. (ii) Diversify if you dont have an intimate knowledge of the company or management. More than 30% in one company is aggressive.
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