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Is there any point in watching this market further – in other words can money be made still? Well the short answer is yes, money can still be made – but it will take harder work. But it is still possible.
Let’s look at the big picture first:
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It is possible that wave five has completed – but we know that often a second wave five can be hit so we could see further moves higher. We can also see on the above chart that the market still continues to range trade – and has been for the last six months. Even though maybe the last week or so feels like a market with momentum. The market has been range trading around 5400 and is finding resistance just above 5500. This is typical of what we see at the top of markets.
So at first glance you would say the market is now well and truly cooked. But let’s look at individual indices and see whether a similar pattern exists. We will look at weekly charts.
Discretionary – XDJ
Still has some upside:
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Energy - XEJ:
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Has upside – but first we could see a wave four pullback. Buy with caution at these levels.
Finance - XFJ:
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Like the overall market, banks are at wave five highs.
Healthcare - XHJ:
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Has upside but a pullback is more likely first.
Materials - XMJ:
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Resources are still in the doldrums with no trend apparent for the short to medium term.
Industrials - XNJ:
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Industrials are still well off their all-time high in 2007 and are also looking very tired with not much further upside.
Staples – XSJ
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Staples have been trading sideways for the last several months and show little sign of a new trend developing.
Telecommunications – XTJ:
This sector has further upside because of the upside left in Telstra – but be wary.
Utilities – XUJ
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A little more upside but tread carefully.
So you can see the sectors are not all in step. If you were to drill down into stocks within sectors with upside, you would find value stocks – but be cautious. As though there maybe upside overall and in particular in some stocks – the risks are increasing.
Enjoy the ride
Tom Scollon
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