Bear Market Rally

By Jason Fittler

November has started with a nice Bear market rally.

If you take a look at the below chart you will see that the market bottomed in October, from this point we have seen the market move back up strongly to 4300, at present it is starting to retest the lows. What we are now watching is for a higher low to be formed.

In my view if the market can bounce off the lows today and get back above the 4300 mark this will be a good sign… this will mean that for now we have seen the bottom of the market, and the Bear market rally is under way. Where will the Bear market rally pull up? I expect to see it get back to around 5000 in the coming months.

On the down side if the market does not pull up and push back above 4300 we can expect to see the market move back below 3750 and possibly form new lows.

So what should we do?

At present it is difficult to determine what the market will do in the short-term.

I would not base any short-term investment strategy around growth.

In the longer term I am focusing on the following;

1.    Income – looking for stock which can continue to pay you a nice income return.
2.    Security – looking for companies which have low debts levels.
3.    Blue Chip – again I am mainly looking to buy in the top 20 shares and their preference shares.
4.    Options – looking to enhance returns through conservative options strategies.

If you can set up your portfolio to obtain a return of around 8% pa you will do well during this Bear market. Long-term growth will come back, so it is important to hold that portfolio. 

Until next week.