No time for nerves as market closes in on record
OVER the past month, the Australian share market has come within striking distance of the all-time high, but at the time of writing this report, has so far failed to break through.
It has now been 140 months since the All Ordinaries Index made its all-time high, and a failure to push through this previous level has left many wondering whether there is cause for concern and an indication of things to come.
Alarmists are, once again, ringing the bell by suggesting the market may crash, with a meltdown of 25 per cent or more. Some are even predicting a global financial crisisstyle (GFC) crash.
I believe this thinking is interesting given that the All Ordinaries Index has never crashed before making a new all-time high, and it has never crashed within a short period after making a new all-time high.
So, a crash anytime soon would be making new history.
This year the Australian stock market has been extremely bullish, climbing steadily towards the all-time high by rising 19 per cent, with conditions certainly being optimal for investors to make good, safe profits.
Therefore, as the All Ordinaries Index climbs closer toward the pivotal all-time high, fear and hesitation begin to rise, which causes resistance to price moving strongly through its highest point.
In other words, the masses are sitting back with a waitand-see-what-happens mindset.
This occurs for two reasons, the first is because no one wants to buy at the top of the market and, secondly because speculators are trying to pick the top, which is causing them to exit their positions out of fear of losing profits.
With the decrease in buying and the increased selling, the market had slowed and may stall for a period of time.
Yes, the market is searching for a high and in the not too distant future it will fall away, which is quite normal for our market.
I expect that the new alltime high will be around 7200 points and for the market to fall into a low in September or October 2019. I also expect that the fall will only be around 10 to 15 per cent from the high. Dale Gillham is chief analyst at Wealth Within. www.wealthwithin.com.au