Upfront Investor Australian Share Market Report 26/11/10

This week ASIC released an investor guide entitled ‘Thinking of trading contracts for difference’ aimed at educating retail investors about trading contracts for difference (CFDs). In my experience, however, the guide is unlikely to achieve the outcome ASIC is seeking, particularly because the information has been freely available on the internet for years. For example, the ASX has provided credible information about CFDs over the past two years, yet thousands of investors continue to open CFD accounts believing that this instrument will provide them with the ‘golden egg’ that investing in shares simply can’t provide. The unfortunate part, which appears to be one of ASIC’s concerns, is that the majority lose money and the question many are asking is why?

In my opinion the answer is simple. While intellectually investors know they are taking high risks, they never really consider how much they will lose, instead their focus is on how much they will make. But as I have said before, without education trading CFDs is like gambling at the races where you believe the outcome is inevitable until you are faced with the real truth. While I commend ASIC in its actions, in my opinion, it will continue to face challenges in educating investors on CFDs. I believe the only way this issue will be resolved is for ASIC to enforce mandatory education standards that are independent from CFD providers.

So what do we expect in the market?

There is an old saying that when it rains it usually pours and this is a true reflection of events we have seen coming back into the headlines over recent weeks. With US bailouts, European debt concerns, currency wars, and now tensions between North and South Korea have come to a head again. Normally we can expect news like this to increase volatility in the Australian market, however, in contrast our market has been incredibly resilient during this time which in my opinion is a great sign moving forward.

This week the market surprised many commentators when, after falling heavily early in the week on bad news to a low of 4,638 points, it suddenly turned on Wednesday and Thursday to recover some of the lost ground. Rather than getting excited about one or two days on the market, what is more interesting to me is the steady way the market has been in decline over the past couple of weeks. This supports my view that over the past couple of months the market has started to unfold in a more predictable fashion, and therefore is more likely to respect the strong support level that exists at around 4,600 points. Given this, it is possible we have seen or are very close to the low I was expecting, and I still maintain the view that the market will most likely rise in December on its way to test prior highs of 4,900 to 5,000 points.

Dale Gillham

Chief Analyst

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’, has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment advice to traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.

For more information please visit www.wealthwithin.com.au