Market Wrap - In a Nutshell

The below chart of the market is a little more complicated than what I normally send out. Why? Because this week we are really stuck to work out where the market is going. In a nut shell here is what we know:-

1.    Fair Value is 6300 for the ASX 200
2.    The market is trading well below the 200 day average.
3.    The market seems to have weakened over the past week.

Other issues to throw into the mix are:-

1.    The US is injecting $700 Billion into the banking sector to improve liquidity.  This has been done before and worked so it should work again. But we will need to wait and see.
2.    Ban on Short Selling, this has had the effect of reducing trading volumes and in turn volatility in the market. But this is only for 30 days… What then?

At present we have more questions than answers and we will need to wait and see the how these measures will effect the market, and if this is the bottom of our market, and indeed if the US will be kept out of recession.

The answers to these questions will become clearer in the coming weeks as the effects of these measures can be seen, until then the best bet is to sit tight only buying into short term trading opportunities as they present themselves.

My view is that we have seen or are very close to the bottom of this correction, but it will take some months to confirm this view. As such the safe option is a controlled measured approach.  

By the way do not listen to the media on these issues; most of the material I have seen circulating is wrong and miss-informed. Remember media sell advertising not information.