4200 here we come!
Back on the 13/08/2010 I wrote that we were about to start heading into the final correction.
You can see from the below chart the last two weeks have confirmed the negative price action.
In my book, this is a good thing. Why?
1. This should be the final wash out of the market, getting rid of those investors who have just had enough.
2. It provides a buying opportunity in a number of quality stocks, which are now sitting on massive yields.
Keep in mind that not all stocks will drop; Campbell Brothers is one of those, which have bucked the trend and has moved up 7% while the market dropped 5%. Other stocks such as Suncorp, Cardno and Woolworths have all had great reports; as such, I do not expect to see much price weakness in these stocks.
The financial stocks and insurance sector are shaping up to be good buying opportunities along with the resources and industrial stocks. I am also very keen on the property sector with Westfield at the top of my list.
When the market falls below 4200, the buying opportunity will start.
Buy for the yield and hold with a median term view for growth.
I expect we will see the market back above 5000 points towards end of this year or early next year. At this level, it will be time to reassess the situation.