The Market Wrap 27-1-10

China looks to slow growth.

By Jason Fittler

We have been calling it for some time that the market needed to pull back. 

Over the past couple of days we have seen the market drop back below 4700 from its highs of 4900. Many are calling for the market to drop further; some are saying this is the beginning of the retrace back to the pervious lows.

This is in my book is an opportunity to start buying the big blue chips which are paying a high yield, with a long term view of 3-5 years.

What is clear is that we are not out of a Bear market just yet, however, with stimulus packages around the world working to prevent another collapse I do not expect to see the March 2009 lows retraced. I do expect that the market will stay in this volatile state for some time yet. As the old saying goes “two steps forward one step back”.

Key issues to watch for are:- Retail sales in the US, recapitalization on US companies and strengthening of the US dollar. This could take 3-5 years before we are out of this volatile market.

In regards to the dollar the experts are expecting to see the Australian dollar to hit parity with the US in the next 12 months. For those thinking about going overseas 2010 could be the time to do it.