Monthly Archives: October 2015

Growth, economic uncertainty and the Fed

The Peoples Bank of China has cut interest rates again (for the sixth time this year) in an attempt to stimulate their economy. With the Chinese interest rate now down to 4.35% there is no doubt that growth in China continues to slow but the actual rate of growth remains unknown. Elsewhere Russia and Brazil are in deep recession while Turkey and South Africa have had a dramatic slowdown. Canada is now in recession so can Australia be far behind?

It is clear that world trade has slowed significantly with falling commodity prices, falling BDI and now the largest container shipping company Maersk cutting its profit estimates significantly. It is hardly surprising that the IMF has yet again downgraded their forecast of world growth to 3.1%.

In these circumstance how can US Fed chair, Yellen, raise US rates, which will make the USD stronger and risk a slowdown in the… Continue reading

Is this a bull market?

It is hard to remember a time when there was so much uncertainty about the markets. There has been real confusion as to market direction and as a result many investors remain on the sidelines with cash. It is interesting that there are many investors who are very bullish on the market and probably an equal number who are adamantly bearish. The market action of last week now favours the bulls, with many major international indices now closing above the 30 EMA on a weekly chart. See for example the DAX index below. Does this suggest that it is time to put more cash into the market? Snap 2015-10-25 at 17.16.22

Economic conditions are such that there seems no chance that the Fed will raise interest rates this year. With very low or negative interest rates, central banks now have no ammunition left and little alternative but to use further quantitative easing to… Continue reading

The bull market and the Shanghai Composite.

Market mood is very bullish at the moment. But bull markets are all about growth. World growth continues to slow and the IMF has now issued yet another downgrade to future world growth. Asset values have been appreciating as a consequence of continued quantitative easing but in the absence of growth, equities appear to be overvalued? So can a bull market continue?

The Australian economy is very dependent on China. The Chinese stock market is less correlated with their national economy than markets of Western nations but it nevertheless provides some real insights into the health of the Chinese economy. The daily chart of the Shanghai Composite below should be of interest to investors. S Comp October

The chart shows two symmetrical triangles which are patterns of uncertainty. The market fell heavily out of the first larger triangle and given the current uncertainties with the Chinese economy this is likely to be… Continue reading

Is this the time to buy Australian stocks?

Is this the time to buy equities? The market is apparently offering a lot of bargains with many blue chip stocks priced at a level where they are showing about a 10% grossed up yield. But are they bargains?

Consider the weekly chart of the ASX200 which shows a Fibonacci retracement based on the 2008 bear market. The 5000 level is the 50% retracement (extended here with the red line) of the 2008 bear market and this level has proven to be very significant. It has been an area of strong support/ resistance as far back as 2006. With the current market sitting on support at 5000, the question now is, will this level provide support for this market? XJOI Oct 2

It is essential to consider our market in terms of the World and the Australian economies. World growth is slowing and the IMF continues to downgrade its estimates of world… Continue reading

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