Market Wrap - Week Ending Friday 5th September 2008

After a sell down last weak in the United States, it would appear that we are now heading into the long awaited down leg. Coupled with the traditional weakness this time of year, a betting man would expect to see the market come off over the coming weeks.

Do not panic; let me say that again, DO NOT PANIC. This will be a good opportunity to pick up some quality stocks a little cheaper. It will be a bumpy ride over the coming months but I expect that this down leg should shake the tree one last time and clear the way for a recovery starting next year.

As you can see in the below weekly chart, the market has been moving sideways for the past couple of weeks. It has been doing this on small volume, which indicates to us that the market is set for a further drop.

So what to do? There is a lot of commentary at present about being out of the financial stocks. If you are a short-term trader then I agree.  If you are a long-term investor I would continue to hold these stocks for the income.

In this period of the market, I would be looking at the material stocks as a source of opportunity. Let me say that I am not trying to pick the bottom. However this down leg will be lead by the resources sector, as such you will have the opportunity to buy in at lower prices. Take advantage of this opportunity.

The resources boom still has some life in it yet and buying into this sector should provide you with a good gain over the coming 12 months.

For those of you who would like to insure your portfolio, then start to think options. Options are a great way to make money in this market, but make sure you use a sensible approach. If you would like more information on options, give us a call.

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