The chart to the right suggests that the ASX stock index has broken through resistance at 3,845. Having convincingly done so, the market has once again pulled back to support at that level. I suggest this is an opportunity to buy.
The reason the ASX200 is looking so positive is because of the positive shape of the Australian economy. The positives are its agricultural and mineral export base. This is positive in several respects. China is talking about buying up commodities, which means commodity prices are going to stay relatively strong, or at least stronger than they otherwise would, so we can expect the ASX market to trade higher as well. This also helps support some of those projects which would otherwise be cancelled, as I am sure that a good deal of investment will be going into mining/mine equity as well as commodity inventories. So we can expect a lot of investment in Australian resources, and that's across the board - coal, iron ore, copper, gold, nickel and ENERGY. There are some large LNG projects on the table. Australian tourism is very weak despite the weak dollar, though that fabulous Qld govt campaign promotion for the 'Best Job in the World' will help.
So basically I am expecting the ASX-200 to climb to 4360 level in coming year, though I think that will be the top of the market. The China factor will stop Australia sinking back to lows, but it will mean the AUD and equities just trading in a higher channel band. The flipside is that the market might go sideways longer, but I don't think so, as I don't think China will be dumping commodities in a hurry.
Andrew Sheldon www.sheldonthinks.com