The Market Wrap + Technical Summary 26-10-12

By Jason Fittler

Quote of the Week

"We’ve heard that a million monkeys at a million keyboards could produce the complete works of Shakespeare; now, thanks to the Internet, we know that is not true." — Robert Wilensky

Last week we saw the market start to pull back.

As you can see from the below chart the market has moved above the trading range for the past 12 months. The question is can it sustain this move.

When we take a closer look at the internal market factors we see some weakness. Our expectation is that the market will pull back. How far is hard to say but we are looking to buy at lower prices.

I continue to be focused on the top 20 companies. The yield and size will provide the security and income we need over the coming 12-months to outperform the market.

Now is also a good time to take some profits or exit those stocks, which are not considered good long-term investments.

If you have gearing in your portfolio now is a good time to review and look to reduce you leverage.

If we look back to April 2011 the market got as high as 4950 and many investors considered that there was no chance of the market falling back to 4000 points. Only 4 months later the market was back below 4000 points to bottom around 3800.

Technical Summary

The internals continue to remain weak with only the large blue chip companies holding the market up at present.

With only the financial, consumer staple, telecom and property sectors holding up while all others pull back.

Expect to see the market lower as we move into the end of the year.