The market has had a strong bounced since the Brexit lows, good news, but concerning at the same time. The main issue is what is driving the market higher. It is not isolated to just Australia all markets across the world have all seen strong gains.
Brexit’s fear has given way to strong July jobs report and a bullish sentiment among market commentators. The four key drivers were that Brexit did not spark a financial crisis, US jobs increase above expectations, earning recession could soon be ending and low bond yields make stocks look cheap.
But be careful, with the extreme levels of optimism, this rally could be overdone as the Bulls enter the high risk zone. The market pulled back on Friday as investors look to take profits before the weekend.
As per our chart the market has made a strong move out of the trading zone, we will need to wait and see if it can maintain this levelbefore calling the trend broken. Given the strength of the current move I expect to see the market at least look to retest the top of the trading range around 5300 points.
At present I am happy to sit and wait for opportunities.