Monthly Archives: May 2015

Market remains bullish in an uncertain environment.

From a technically bullish chart in early May the Australian index has had a disappointing performance during the month almost entirely due to the fall in the bank sector. In the USA the S&P500 continues on its upward path and the very low level of the VIX volatility index gives investors some assurance of low risks that we associate with a continuing bull market. On fundamental grounds there is still uncertainty about the effects of interest rate rises in the United States although it is certain that the Fed will raise rates: but when? It is likely that the effects of an interest rate rise are well and truly factored into the market now and of course with such low interest rates investors have little alternative but the equities market.

In Europe the indices are very positive and while the threat of deflation is still apparent there have been some… Continue reading

The banks contribute to stock market uncertainty

The past few months have been difficult for Australian investors with the market moving sideways to down at a time when most world markets continue at around record highs. The Australian market is dominated by resource stocks and financial stocks, mainly the big banks and over the past few weeks bank stocks have fallen by as much as 16% and this has pulled our market down.

In recent years Australian bank shares have risen sharply in price compared to most major world bank stocks. Australian banks are efficient and operate in a less competitive environment than most of the big world banks and in recent years have had a buoyant properly market. As a result the big four banks have been very successful and continue to provide shareholders with high dividends.

But investors are now becoming wary of the banks and see a weakening Australian economy with rising unemployment but… Continue reading

The Australian dollar and the dilemma of the RBA

The Reserve Bank of Australia (RBA) has a dilemma. It seems that regardless of actions it takes to lower the cash rate, the AUD continues to rise and as recently as last week reached a high of 82 cents against the USD. There is a consensus that the current real value of the AUD is closer to 75 cents and that it should be expected to fall below 70 cents.

By international standards the AUD remains overvalued despite actions by the RBA to cut the cash rate. The main cause of this has been the recent declining value of the USD which over the past two months has seen the US dollar index fall by 7% from a value of about 100.

During 2010 and 2011, Australia reported consistent trade surpluses due to high prices of commodities but since 2012 the trade balance has been in deficit due to a… Continue reading

Technically this market is bullish

This time of the year is always one of uncertainty for investors in the stock market and May has often been a month where a market decline has started, hence the adage, “Sell in May and go away”. From a strong uptrend over the past couple of years, the Australian market has now been in a sideways pattern for the past few months.   So the questions is, whether we will enter a corrective phase or whether the bull market will continue?

Technical analysis can use patterns to provide insights into probable future market movements. One very useful pattern is the double bottom in a rising market. When this pattern occurs in a rising market it provides a high probability that the market over the coming few weeks or even months will continue to move upwards.

Consider the following weekly chart of the ASX200 index which has been in… Continue reading

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