The Market Wrap Wed 21-4-10

By Jason Fittler

5000 points for the ASX 200 is this a new start?

Last week we saw the ASX 200 and the Dow Jones hit 2 year highs. The ASX 200 closed above 5000 points and the Dow Jones above 11000 points. This certainly sent a signal that the market is starting to recover. The US markets are currently into reporting season with some good results starting to come through.

Breaching the 5000 level is a good indicator that our market is more likely to hit the upside target for this year being 5400. This will give investors another 10% upside from the current levels, couple this with the high sustainable dividend currently being offered by the blue chips and 2010 will be a very profitable year indeed.

What to do!

At this stage the rally has been led by the blue chip stocks, small caps are clearly lagging the recovery and the second tier stocks have only started to move over the past couple of months.

If you are sitting on cash I would take any opportunity to buy into the market; that is if the market does pull back to around 4700 points buy into the majors such as banks, mining, insurance and retail.

If you already have sufficient blue chips start looking into the second tier market. My key picks are in the insurance (SUN), property, infrastructure and energy. These stocks are paying high yields and have plenty of upside left.

In regards to the small caps I think that they still have some time before they run, but if you are fully loaded on the above stocks then there are some small cap stocks which have good potential from here.

Take profits

For those who were buying from the March 09 lows and are now sitting on some nice profits, lock these in. Do not sell out your entire holding but make sure you take some profits as the market will remain volatile for some time yet.