The market continues to trade in this ascending triangle as we approach 4300.
You can see from the above chart that there is support for the market below the line and it is quick to recover from any drops and quickly and moves back in the trading range.
This means the US has started to recover.
In Australia with interest rates on hold and expected to pull back in the coming 12 months, investors are once again confident enough to get back into the market all be it only on the dips. Our market is not strong enough to create a new Bull market but investors are looking for better results than cash.
We have all heard that China is slowing but when this is put in context of historical sales to China they are still buying more Iron Ore and Coal then the historical average and this will continue.
With the US recovery on the way and China demand still strong, I can only see one head wind at this stage.
That head wind is the current Federal Government. The Carbon Tax and the Mining Resources Tax will slow development in this sector in Australia. On the 23/03/2012, Queenslanders shot a warning shot over the bow of the ALP. Clearly, the people are unhappy with government policy.
The GFC is now coming to the average person, unemployment is moving up, interest rates are higher, lending is tight both residential and commercial property values are down.
I suspect that unless the Federal Government starts to listen to the people of Australia then we will have a major shift in leaders in the 2013 election. This to me will remove the final head wind for our economy and the markets starting to recover in earnest.
Until then, I will continue to buy Blue Chips shares for the income.
For more information on any of the above please contact us on 07 4771 4577.
Subscribe to Grow Your Wealth the FREE weekly financial newsletter.