Important Update from Peter Spann
Here We Go Again!
8 April, 2011
In my last two updates I said a few things…
February 16th, 2011
“5000 really is a significant psychological number for the market. On the way up (March – Sept 2006), it paused there before rocking up to record highs. On the way down (July-Sept 2008) it also paused there before continuing its plummet to the bottom. In Oct 2009 it tried to get there but didn’t make it, in Jan 2010 it ran out of puff just shy at around 4950, before finally making the mark in April 2010.”
March 11th, 2011
“5000 has just been re-affirmed as a very significant point in market psychology and so therefore we can have a good deal of certainty about one thing – when the market approaches that number we need to pay attention. Even more importantly if and when it holds above that number a new bull run will follow.”
And…
“I think there is a good probability the market will hold at around the 4500 to 4700 mark.”
And…
“It is not unusual for the market to vacillate significantly in the 5 years or so after a major correction like we had in 2008.
So you really should consider this type of market behaviour to be normal. In fact you should take advantage of it.”
Well, firstly the market held at about 4610, so it seems I was spot on there.
And secondly anybody who paid attention and “took advantage” would have done really well because…
Thirdly the market is now back at the “magic” 5000 and appears to have paused. As a side observation it scooted back up almost as quickly as it dropped, which is a little concerning.
But the economic news out of the US lately has been positive and that always gives the market an “excuse” to go up quickly.
We’ll need some significant impetus for the market to hold here and go up again, but I am quietly confident.
And if not this time, soon.
Personally I’d like to see it hover around this point for some time as it would give the buy-write an opportunity to shine but I think market impetus is positive and barring any significant geo-political or economic event we should see a new support set here.
So where to from there?
IF it does hold then we should see the bulls take control for some time.
If not then we’ll continue to see the market fluctuate between 4500 and 5000 until it finally holds at the 5000 mark.
Now, I must say there is not a lot of immediate upside past 5000. 5200 is the next resistance so maybe we’ll see a new channel between 4500 and 5200? From there it’s all the way to 6000 before we see resistance again and as optimistic as I am I just can’t see our market (or more particularly the US market) having the value behind it to sustain those levels.
If it does rise rapidly to those levels and stays there or above I would be concerned. While sentiment is the number one driver of the market in the short term eventually fundamental value has to be there or rallies are not sustained. Equally if the market falls below fundamental value the market will eventually rise to meet it.
Regardless of what happens the next little bit will continue to offer investors excellent value if and only if they act quickly and sensibly.
Don’t go headlong into a market like this all guns blazing leveraged to the hilt and expect it to turn out well, but keep carefully deploying funds steadily into the market, especially as dips occur to gain value and to take advantage of upside.
If you go back to ’87 there were three runs before the market finally got to over its previous highs. Smart investors took advantage of those runs and over a 7 year period created a lot of wealth for themselves.
I believe that we are seeing that pattern now.
Blind Freddy can make money when the market is screaming up (and then probably do something dumb and lose it when its going down)…
Real money is made now.
Happy investing!
Important Information
Peter Spann is a representative of Excela Equities Ltd (ABN 17 010 763 041) and Freeman Fox Pty Ltd (ABN 47 062 481 378), holders of an Australian Financial Services licences (AFSLN 246510 and 220622 respectively). This general advice is provided by Freeman Fox Pty Ltd. It does not take into account your investment objectives, financial situation, or needs. You should consider the appropriateness of this advice having regard to these matters, and read the relevant Product Disclosure Statements (PDS) before making any decision to invest.
Information contained in this update is obtained from various sources. The changing character of markets requires constant analysis and may result in changes. Past performance is not a reliable indicator of future performance. All investments contain an element of risk. Actual performance will be different and returns are not guaranteed. While information in this update is given in good faith and is believed to be reliable and accurate, Freeman Fox gives no warranty as to the reliability of accuracy of the information, nor accepts responsibility for any errors or omissions of third parties. Opinions expressed are subject to change.
If you require assistance in relation to your personal investment situation please contact a representative of Freeman Fox Pty Ltd on 1800 000 369. For a copy of our Financial Services Guide, please go to http://www.freemanfox.com.au.
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