Brighter days ahead

Published in the Geelong Advertiser, July 2008 by Dale Gillham

There is an old saying that the darkest hour is just before dawn and this is, at times, a very appropriate phrase when referring to the share market.

In October 1997 experts were predicting a global meltdown as a result of the Asia crisis, yet our market rose 40 per cent over the next two years. The same situation arose following the tech wreck in 2000, yet our market rose over 18 per cent the following year.

Following the September 11 crisis, experts where once again predicting doom and gloom for the world economies, but our market only fell around 6 per cent over the next 18 months into March 2003.

Since then, we have had the biggest bull market in history therefore the pull back in the previous 12 months is a natural process whereby the market is simply adjusting to more realistic levels.

Since the Asia crisis our market has risen nearly 130 per cent, despite three major events that were predicted to have enormous impact on our economy.

The question that remains then, is it time to buy? Not yet but it is getting pretty dark, so be prepared.

Over the past seven weeks the market has been in a sustained down move, with the All Ordinaries falling to a low of 4999 on Thursday.

The last time our market fell for a prolonged period was the eight week fall into the March 2003 low.

Given this it is highly likely that our market will rebound over the next one or two weeks.

While it is possible the rebound will signal an end to the current market fall, I believe it is likely to be short lived as I am expecting the market to fall away one more time to exhaust the current downtrend to eventually find support around 4800 points.

While I would urge investors to remain patient, I believe it is time to get ready to take advantage of the next bullish move.

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