The Market Wrap Friday 15-5-09

By Jason Fittler

Is the bottom in?

We have been calling for some time that the Bear market rally will pull back, and over the past week, we have started to see this pull back. As you can see in the chart below, the market in now at a resistance level. If it holds here it could move higher, but if it breaks through we expect to see it move back into the trading range.

Now there is a lot of talk out there, some say “We have not seen anything yet” they are looking for more lows, others are calling the bottom in and that we have started a new Bull market.

My opinion…

A recession is more then just a falling market, there are also a number of major economic and social indicators which you also to consider. You are wasting your time trying to pick the short term movements. The facts are;

1. Interest rates are low.
2. Unemployment is going higher.
3. Wages will hold steady for the coming years.
4. Inflation will rise.
5. Governments are buying bad debts, and will do so until “Toxic Debt” is good and buried.
6. China needs resources, but is holding out for better prices.
7. Budget deficits are part of life and the government will spend on infurstructure.

For my money, buy top 20 as core holdings, look to property, infrastructure and preference shares for growth and income. Play small resources, gold and Oil. Be prepared to take profits.

We are in a Bear market and we are going to be there for some time. Now is a great time to add to your portfolio when the opportunity presents itself, buy dividends.

The market will bump along for the coming years, the Bulls will be back and if you are not in the market you will miss the turn.