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You might have been forgiven for thinking on last Wednesday that we were witnessing the beginning of the end. Well in some investors’ (or commentators!) minds it is the end of the big Bull Run. Go short in this market at your peril!
Equity markets still have some running to do. That is not to say we will not see continuing volatility – that is likely to be the hallmark of markets for the next year or so as they march to new records.
There is always the threat of a decent market pullback looming as you can see from the ProfitSource 30-week chart for the Australian All Ords:
click chart for more detail
I have shown the five year picture to put into context the extent of the strong move we have experienced.
One of the aspects of Elliott Wave is that it more often that not warns of a pullback. There is always that risk and we don’t need Elliott to tell us. However if one is always expecting the worst or for markets to pull back then you can find yourself constantly on the sidelines.
You will note that a decent pullback now is to the 5800/6000 level. Anywhere near these levels, at least for the time being, we are going to see strong buying – foolhardy you might say but it is fact.
Despite jolts from the US sub-prime craziness or the Shanghai shakeout there are unprecedented levels of global money looking for a reasonable return and investors are not quite ready to resort to the low albeit safe returns of cash.
I expect that the Australian share market can easily take out the 6800 level in the coming months.
The DOW – still the doyen of equity markets – can hit 15,000 in the coming 12-18 months:
click chart for more detail
Maybe a bumpy ride but just keep the seat belt secure!
Enjoy the ride!
Tom Scollon
Chief Analyst
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