Monthly Archives: October 2014

Volatility and perhaps a bear trap?

Over recent weeks our market has risen consistently after a sharp 340 point fall. Maybe we are witnessing a bear trap? It was interesting to note in the chart below that yesterday the Australian index closed near the low of the day after reaching a high of 5462 which was exactly the 61.2% Fibonacci retracement (see chart below).   Interesting!  xao ;at

Could the market go higher? Of course it could but investors need to acknowledge increasing risks that are now evident in so many world economies. There are significant problems with the major economies of the countries of the European Union and in China and Japan. Sovereign debt remains very high and there is the increasing risk of sovereign default from Greece, Venezuela and Argentina, but Greece may again avoid default if bailed out by the European Union. The dramatic fall in the price of oil is good for… Continue reading

Have the lessons of history been forgotten?

Over the past four days the Australian market has gone against world markets and had significant rises so it seems that some investors don’t understand (or perhaps don’t remember) anything about stock market history.   Our current market is looking increasingly like a repeat of the bear market of 2008 and when one considers that world growth is at best weak and is likely to weaken further; investors need to understand the existence of very serious economic problems which include:

Continuing EU issues with unemployment, low inflation or deflation & high sovereign debt.

Falling commodity prices.

The potential for the Chinese property bubble to burst amid widespread social unrest.

Serious issues in Russia with the rouble collapsing, aggravated by falling oil prices.

The failure of monetary policies world wide with Central Banks losing control of economies.

The emerging Ebola crisis with its serious economic and social consequences.

 In… Continue reading

We are in bear market territory

With the world economy looking increasingly vulnerable over the past year despite all efforts by central banks, there has been a debate as to what event could trigger a bear market. While there are so many highly significant world issues at the moment, the Ebola outbreak may well be that trigger and technically the bear market that has been anticipated for the past year now seems to be underway.

The daily chart of the All Ordinaries index below, shows a persistent downtrend over the last month. It has broken an uptrend of more than two years and is well below the often quoted significant 200 day moving average shown in red: the mood is quite bearish.

AO dlyy oct14

But it is the monthly chart of the index (below) which includes the RSI indicator, which is more significant.   The RSI is a high probability indicator and one of the very few… Continue reading

Australia is an uncompetitive nation.

On recent visit to the United States I was amazed by the different wage structure compared to Australia. Wages in the United States are less than half of the Australian wage when considering an equivalent job. The following table taken from “The Economist” of October 4 shows just how out of balance real wages have become in Australia compared to other major economies. Over the decade ending in 2012, the mean wages growth in Australia was 22% which significantly outpaced wages growth in all other countries noted in the table.  Mean wages in the United States have only increased by about 7% while in Japan, Germany and Italy there was a wages declined over this same 10 year period. Aus jobs

Wages in Australia have risen to the point where it is increasingly difficult for us to compete on international markets and so many industries have been forced to move… Continue reading

The Australian dollar and a bear market.

The Australian equities market is showing significant weakness compared to all major world markets. A recovery in the Australian market was expected considering the lead of stronger overseas markets, particularly in America but this has not happened and in fact Australian shares continue to fall.

The prime reason for our falling market is the weakening Australian dollar which is under pressure as a result of a very strong US dollar. Foreign ownership accounts for at least 30% of our market and with a weakening Australian dollar overseas investors are facing increasing losses and are selling Australian equities. This has mainly affected the blue chip stocks with the banks notably under pressure. The falling value of commodities, particularly iron ore has also had an adverse effect on the Australian dollar and with a falling Chinese demand for commodities it is likely that the Australian dollar will continue to fall and a… Continue reading

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