You must be the change you wish to see in the world. - Gandhi
The market rebounded this week with strong interest in the top 20 companies. My guess is investors are chasing the yield as interest rates are expected to be cut again in the coming months.
When we take a closer look at the small and mid cap stocks we see a very different trend with small caps down and mid caps flat.
This indicates to us that this rally will be short lived and when it stops we expect to see a decent pull back.
On the fundamental front companies are performing ok but slightly below expectations. We also note that there are very few buy recommendations around at present and most of these are in the resources sector. This would indicate that the smart money is staying out of the market at present and waiting for a buying opportunity.
We continue to recommend that you hold the good quality blue chip companies for the yield and keep any spare cash handy to buy up on the dip. Trading the market is hard due to the transaction costs and capital gains.
If you want to hedge your position you may want to speak with Daniel Goulding about taking an options position.
Also note that the retail stocks are heavily shorted.
Next week will tell us if the top is in and if we can expect to see the market pull back. The technical indicators certainly are pointing to a weaker market in the short-term.