Share Market Wrap 2nd Nov 06

Last week the All Ordinaries Index traded through its previous all time high of 5352.10 achieved in May this year, making the current bull run the longest in over 25 years. The second longest bull-run was prior to 1987 when the Australian market traded up for 39 months. 

 The current bull market has been rising since March 2003 with the largest fall into a low during that period of 11.70% occurring on 14 June 2006. Given this, we have just entered month 44 of the bull run on the Australian market, which is the same length as the longest bull run I can find on the Dow Jones. The question I am asking is what is driving the market? Could it be the increase in compulsory superannuation or the thousands of SMSF being opened every month? Maybe it’s the strong interest from trading CFDs or the high taxes on property resulting in traditional property investors switching to trade shares. Whatever it is, I know that the good times never last, so being conservative right now is the best strategy to adopt.       

So what is happening on the market?

As I have previously indicated, the statistical probability of the market continuing to rise is very low, however, only time will tell if the statistics stack up. This week the All Ordinaries continued to break above my previous target levels and is looking strong. That said I still believe this is a false break that could catch many traders out as I am expecting the market to fall away for at least two to four weeks into a low with price falling to between 5200 pts and 5000 points around the 15th to 22nd of November.  Last week I indicated that we will most likely see more volatility in the market up to mid November and over the last six days the market has switched from trading up to trading down with many shares moving strongly in both directions. Given this, I would urge investors to be very careful in the market right now.