On Friday last week, the market jumped following on from the overnight lead in overseas markets.
The major change was brought about from short covering.
Over the past 12-months, the markets across the world have been shorted. Investors have taken an option position against the market in anticipation the market will fall. This position seemed to change on Thursday night with investors looking to sell out some of these positions. This is a very positive indication that investors are becoming more positive long-term.
This seems to be due to the expectation the US interest rates will remain low for some time.
Back here at home the major banks have also increased interest rates reducing the pressure on the Reserve Bank to increase rates.
We expect that the market will remain volatile however we think that the price low is in. The emotional low may now also in as well. In which case, we can expect that generally the market will rise over the next 1-2 years.
This is not a call to rush in and buy, but it does give us more confidence to taking buying opportunities.