FYI | Aug 30 2010
By Rudi Filapek-Vandyck
The Australian share market still has some catching up to do in the final two days of August, with the risk skewed to the fact that major indices might enter September at levels below what they were around the same time last year.
Last year, the S&P/ASX200 index opened the new month by closing at 4,514.60 on September 1st, following on from a close at 4,479.10 on the last trading day of August. Given the firm opening on Monday morning, it remains possible both these levels will be crossed this week.
At that point, the index will still have moved sideways, on a net basis, for a full twelve month trading period. (Lucky for some investors, Australian companies either announced or already paid some 4% in dividends over the period).
Such a sideways market usually keeps the debate between bears and bulls at high octane levels. This time is no exception. On one hand we have the likes of Clifford Bennett, economist at Herston Economics, who ends his messages to readers nowadays with “very bullish”.
Bennett is convinced the world is about to awake to the fact that a new bull market has started, one that will last at least five years and up to 15 under an even more positive scenario. This is why Bennett talks about a “Grand Bull Market” that will see the overall share market valuation double over the next few years.
On the other hand, we have a whole army of well-respected market commentators, including the likes of Harry Dent in the US who continue to warn investors that what we are witnessing is the beginning of another thirties (Japan) style Ice age.
Most commentators are somewhere in the middle, with an underlying bullish tone, though not necessarily with regards to the next two months. Many chartists are still projecting a new low for this year sometime in October.
US based trading guru Dennis Gartman surprised his “fans” in July by turning positive on US equities and going long materials stocks and heavy dividend payers in the US. He reported at some stage his reversal from a negative view triggered quite a number of negative email responses.
For a few weeks Gartman's reversal seemed but the right thing to do, until the market reversed course again in August. By now, Gartman has closed most of his long positions in the US share market, his official stance has moved back to Neutral and last week he turned damnright negative again.
On Friday, Bennett's followers will have been buying stocks (though the market arguably moved higher on short covering). Dennis Gartman's readers tend to make up their own mind as they work for Goldman Sachs and the likes, but we think Gartman himself would have been selling some more into this rally.
See also the following stories from last week:
Buy Shares Now, Says Clifford Bennett
The Wisdom Of The Chinese Gambler
