Share Market Wrap 1st Sep 2006

The reporting season is now over which means we will finally see some normality in our market. Although it is interesting to note that the reporting season often brings some surprising outcomes to a companies share price. BHP, for example, announced the largest profit achieved by any company in Australia yet the stock traded down in price. Resmed, after announcing its best profit ever, fell even harder. Only a few years ago NAB announced a record profit and its share price fell by around 30%. On the flip side, many companies that announce very bad profits tend to rise strongly. While this seems backwards and often creates confusion among investors, it is obvious that the old adage ‘buy in gloom and sell in a boom’ is alive and well.

Last week I indicated that I expected the market to break above 5070 in the coming week and this occurred yesterday (Thursday 31 Aug) as the All Ordinaries index rose strongly. The market has now traded up for five consecutive days, so we may see it trade down for one or two days over the next week but I am still expecting it to rise above the high of 5104.90 achieved on 9 Jul 06 in the next few weeks. That said I am also expecting the market to trade down for one or two weeks before the end of September. Given this, I don’t expect the market to rise much above 5070, with 5200 being my upper limit, before it falls away again.