Market Wrap 8-12-2012

  Normally when you look at the below chart you would have a good feeling about the market.

What the chart does not show you is that the volatility in the marketplace has increased.

This means more investors (smart money) are starting to buy PUTS over the market.

PUTS are options positions that make money when the market falls. Investors take out these positions to protect or take insurance against a drop in the value of their portfolio.

Why not just sell? If you were to sell it out when you have a very large portfolio you need to take into consideration, fees, capital gains and loss of income.  As such taking a PUT is a cheap and effective way of holding insurance.

We have seen the level of PUTS held over retail stocks increase over the past weeks. This is a good indication that the market is factoring in poor retail sales and as such expected to see this sector fall in the coming months.

This does not look like the start of a Bull Market. This is due to our economic outlook, the global economic outlook and the Federal Labor government hinting that the surplus may now not eventuate.

We are still expecting a pull back in the market.

For more information on the above please contact us on 07 4771 4577.