Market Wrap - Week Ending Friday 29th August 2008

By Jason Fittler

Summary: The market is cheap but will most likely move back down before consolidating and starting a Bull rally. Keep your cash handy.

Now is a good time to take a look at how Australian companies have performed.

Of the companies which have reported to date, 27% have exceeded expectations, 55% are in line with expectations and only a mere 18% are below expectations. I put this good result down to companies leading out with good guidance coming into the reporting season.

Drilling down further we see that 48% of companies who have reported have given positive guidance on growth. This is mainly in the Telco’s, Health and Materials sectors. While 27% have reported neutral growth and 25% negative growth, this has mainly fallen in the Banks, Financial and Media sectors all of which was expected.

Looking at the top 20 stocks, we have seen an average growth of 11.2% for the previous year, most of that can be contributed to BHP, but even when we take BHP out of the equation we still have see growth of 9.7% over the past 12 months.

What does all this mean?  Overall the Australian market is in good health with positive growth in the top 20 stocks.  Earnings have held up and with it your dividends.

Below is a chart of the market, what you should take from this is the market is currently still cheap. That is the blue line is below the red (red being the 200 day moving average), however looking at the bottom section of the chart shows that the market right now is over brought.