After a couple of strong weeks in the market we have seen it pull back in the later part of this week.
I expect that this move will stop somewhere between 4000 to 4100 points.
Fundamentally Australian companies are in good shape and the European Crisis is on the right track.
As such I am taking this opportunity to top up on a few holdings.
The Market in the Coming Months
I am still expecting to see the market back above 4500 in the coming months. The volatility of the market is here to stay for some time but if we look at the below chart you will note the lows are higher each time the market bottoms. This is a good indication that investors are slowing getting the cash back into the market.
This week the RBA once again cut interest rates. For me this was a surprise given that they also cut rates in November. I suspect that this was a pre-emptive strike as job numbers start to weaken and housing sales are well down.
This is positive news for Australia as I am expecting that we are heading into tough time over the next 3 years.
The lower interest rates should hopefully give the recession a soft landing.
We just need to be careful that the RBA do not over do it. If rates drop too far and over stimulate the economy we can expect a very hard landing.