Last week we saw the market take a fall back to support levels of 4500, below the 4700 support levels I was expecting. The bulk of the drop came about in the materials sector. There were two main catalysts for the fall. First the sovereign debt issues in the UK mainly Greece and next the new super tax introduced by the Rudd government on miners.
The debt issues in Greece now seems to be solved, but we are left wondering whether this is just the tip of the iceberg.
As for the super tax, this still needs to be approved and I expect that there will be strong opposition to the proposal.
Regardless, Australian companies are still looking strong and are paying high yields, which make them cheap at these levels.
We advise caution given the fundamental roadblocks which are currently being thrown in front of the market.
However, now is a great opportunity to invest in blue chip stocks if you have some cash sitting on the sidelines.
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