By Jason Fittler

If you read the article in the Townsville Paper on the 05/03/2010 by Daniel Goulding (of my office) you may be wondering who to follow about where the market is heading.  

If we take a look at the below chart you can see we closed Friday on 4767 points, once again we are getting close to the 4800 mark which is where we have seen resistance in the past.  This time it has been a slower move up. We are still experiencing some resistance to the market moving further ahead and we are also seeing most of the gain coming from the big blue chips. The small cap stocks are struggling in this market.

To me this is an indication that the market will struggle to reach new highs at this point in time and we could expect to see a pull back in the near future.

So who should you follow? It depends on what you are trying to achieve.

For long term investors use the opportunities to pick up quality stock paying a large dividend, the two which come to mind are Spark Infrastructure and QBE, I grabbed some for my portfolio this week.

For the Traders, pay close attention to Daniel’s calls perhaps take a look at selling some covered calls.

By Jason Fittler

Will the trading range hold?

Over the past weeks we have seen the market test the 4500 low point, once again the market pushed back up to 4700 before re-tracing the gains over the past couple of days. Australian companies are currently in their reporting season and although a number have come out with good results the focus has been on the under performing companies. So far we have seen an ordinary result from Telstra and a poor result from Toll Holdings.

BHP and RIO have also fallen over the last couple of days. I expect the next couple of weeks to be volatile while investors trade on the back of any news. I however will be using any major sell down in good quality stocks as an opportunity to add them to my portfolio.

Right now is a great time for the long term investor, buy good quality stocks paying a high yield and hold for the next 3-5 years, the days of the short term gains have past for now.

Let the institutions rip themselves apart while we sit back and enjoy the healthy dividends.

Is this the beginning of the end or the start of the rally?

By Jason Fittler

The market has dropped 10% over the past month; once again we have seen the market hold around the 4500 mark. As we have been saying for the past 12 months although the recovery is under way there are still many economic issue to be dealt with and Greece is one of those issues. These economic issues will see the market continue to be volatile over the next couple of years.

At present the technical analysis’s are looking for the market to re-test the lows, the broking houses are talking the market up saying that this is merely a buying opportunity.

For my money it is business as usual. Investing in general will only yield great results if you take a long term view and behave in line with this view.

The market is made up of individual companies; many of these companies have sorted out their finance issues, reduced costs and cut staff. They have done what is necessary to restructure for the changing economy. These companies will do extremely well over the coming 5 years.

Amongst the top 200 companies there are many opportunities to buy quality companies; I am focusing on those which are paying a high yield with a view to holding them for the long term.

A year ago it was hard to say which companies would survive the next 12 months; this is no longer a problem.

Dips in the market are an opportunity to buy quality shares with a 3-5 year view and hold them for the dividends.

Now is a time to look past short term gains, those days are behind us, and focus on what you want your portfolio to look like in five years time.



By Jason Fittler

Is this the pull back we have been looking for?

For at least three months now we have been looking for the market to pull back. It would appear that this has now happened with the market once again finding support at 4500.

But where to from here, short term still expect to see volatility as the US continues to report along with news flow out of China and Greece.

This is in my book is an opportunity to pick up some more blue chips stocks which are paying a high yield as cheap prices. It is also a good opportunity for short term trades in the material sector, at present my pick in Newcrest, chasing the gold sector.

Long term, the reserve bank kept rates on hold for now, this give us poise as what we are currently seeing is low interest rates, improving earnings in the blue chip companies and overseas companies re-capitalizing their business does lead us into a good year or two in the markets. I do expect to see the market above 5200 sometime this year perhaps as high as 5400.

Downside is the government debt levels, at some point this will pull the economy back, as such I have a cautious 3-5 years view and will continue to monitor the situation closely. The point now however is that there is money to be made to trade the short term with an eye on the Horizon.

China looks to slow growth.

By Jason Fittler

We have been calling it for some time that the market needed to pull back. 

Over the past couple of days we have seen the market drop back below 4700 from its highs of 4900. Many are calling for the market to drop further; some are saying this is the beginning of the retrace back to the pervious lows.

This is in my book is an opportunity to start buying the big blue chips which are paying a high yield, with a long term view of 3-5 years.

What is clear is that we are not out of a Bear market just yet, however, with stimulus packages around the world working to prevent another collapse I do not expect to see the March 2009 lows retraced. I do expect that the market will stay in this volatile state for some time yet. As the old saying goes “two steps forward one step back”.

Key issues to watch for are:- Retail sales in the US, recapitalization on US companies and strengthening of the US dollar. This could take 3-5 years before we are out of this volatile market.

In regards to the dollar the experts are expecting to see the Australian dollar to hit parity with the US in the next 12 months. For those thinking about going overseas 2010 could be the time to do it.

By Jason Fittler

USA reporting season.

After a strong market through December we start to move into the US reporting season once again.

As you can see for the downturn over the last two days of the chart it has not started well. We are looking for strong retail sales over Christmas and strong underlying cash flows.

I expect 2010 will be the year of the US market and I expect to see the large US companies re-capitalise themselves, US interest rates move up and their dollar improve. This should push their market higher.

Short term we can expect to see a little pain as I think retail sales will disappoint.

As you can see our market struggled to stay above 4900 and has started to move back towards the trading range of 4800-4500.

In my books this is a buying opportunity, there are plenty of good long term, high yielding stocks to buy in this market.

The top line of my chart is 5200, this is where I expect to see our market move in the medium term.

If you are a long term investor this market is providing you with plenty of opportunity.

By Jason Fittler

2009 will go down in history as one of the best years in our market.

There are two important figures here. The market rose 1125 points or 30% from January to December, but from the lows of March 2009, the market rose 1800 points or 59%. Reinforcing our view, not to panic and sell out at the bottom. For those who invested heavily over the 2009 year you have done well.

If we go back a couple of years, you can see from the below chart that the market is 26% off the highs and back to the level of September 2007.



The gains were made in the blue chip sector with the resources and finance sectors doing very well.

We have also started to see a recovery in the infrastructure sector and the property sector, which is currently restructuring and should have a good 2010. I expect to see a lot of takeover’s in the property sector as the strong take advantage of the weak. I am also bullish on the smaller resource companies. Investors in the resources sectors have looked for safety in BHP and RIO and I expect that investors will start looking for more growth and value in 2010.

Cash is still overweight in the market place; many investors are still sitting on the sideline waiting for confirmation that all is well. This cash will push the market higher at some point in the future. As such I am taking a long term view on investments. I do expect to see the volatility continue, any dips should be taken as an opportunity to enter stocks.

Dollar

The Australian dollar started the year at 0.72c and closed at 0.92c with a low of 0.62c. One of the major affect on our dollar is interest rates. As Australian companies have re-capitalised and the Reserve bank has taken the steps to increase interest rates to curb inflation giving  Australia the highest interest rate in the western world. This is a negative if you have a home loan but a positive in attracting overseas investors to our country, giving our market and economy a boost.

Gold

The gold price started the year at $860 an ounce and closed at $1100 an ounce, however, the sale of physical gold has not increased in line. As such it appears that the gold price is being pushed in the futures market as investors look to hedge against the concerns in the US. Going forward we still expect to see the gold price move higher, however, short term I am looking for a pull back.

Oil

Oil started the year at $48 a barrel and closed at $81 a barrel. We have a fair value price of $75 a barrel as such it was looking undervalued at the start of the year. I would expect to see the oil price hold around these levels for now.

2010

Even with 2009 being a good year I do expect to see further upside in the 2010 year.

At present the market is trading in a range from 4500 to 4800. The start of the year saw the market break out of this range once again moving above 4900, my next target for the market is 5200 which is another 8% above the current level. This is a short-term target, other commentators are looking at the market getting to around 5400 being 10% above the current level, and they are expecting this in the current quarter.

I also expect to see some sectors out perform; property and small caps being two that I am taking a close look at.

Also if you are sitting on cash, look to get this invested now, before the masses. You can easily obtain a yield way above the bank term deposit rates in conjunction with good growth. In my view cash in no longer king, as such I will be fully invested as soon as possible.

Make sure you keep an eye on our web site www.growyourwealth.com.au for all the up dates and latest ideas.

Happy New Year.

Downside risk!

By Jason Fittler

The last week has seen the market unable to push up towards 4800 again, however, we have stayed in the trading range. Given that we are moving into the Christmas break I would expect to see trading slow over the coming weeks.

The news out of the US is still mixed while at home it is more upbeat. Last week we had NAB looking to take over AXA and Telstra’s negotiations with the Government looking to have a more positive outcome than first thought.

My money is still on buying good quality stocks paying exceptional yields, the price of a company may jump around on news, but if the company has sustainable dividends it will eventually bring the price back up.

Wishing you all a Merry Christmas and Happy New Year.

By Jason Fittler

Still in the trading range.

"The best play in the market right now is an income one."

Again we see the market in a holding pattern, with the market making higher lows over the past 2 months. This would indicate that at present the risk is to the upside.

The market right now is looking for good news, something to push it to new highs.

I am looking for the market in the short term to get up around the 5000 level before it finds resistance, this could take a couple of months and certainly there are a number of economic issue to over come. But short term I am bullish.

Longer term is a different story. The best play in the market right now is an income one. Many investors have moved to cash over the past 3 years, now is a good time to look to buy blue chip assets paying high yields from cash flow.  Investors will do well to adopt this approach.

Traders keep an eye on the materials sector, gold and coal being the hot spots. I do expect some volatility in these sectors which will give you some opportunity.

By Jason Fittler

Let’s take look back!

The below chart shows the movements in the market over the past four and a half years. As you can see from this chart every large drop is followed by similar paced recoveries. This is clear in August 2007, March 2008 and finally in March 2009.

It is during these recoveries that you can make good returns; or for those of us riding the ups and downs of the market, it is when your shares recover.

What is clear now is that this initial recovery is completed.

The question now is, where to from here?

It is true that not all of the ducks are in a row, however, Australian companies have certainly taken the necessary steps to re-capitalise themselves, improve cash flows and structure sustainable dividends. Even if the market does pull back these companies will be able to maintain dividends and income - Once again looking for good medium term investments paying solid dividends which will become core portfolio stocks.

It is true that the gains on these will be slower than what we have seen in the past six months but long term you will still be able to achieve around 20% pa.

My focus is now on the USA, I want to see companies recapitalize and retail sales start to pick up.