Are We in a Bull or Bear Market in the Short Term?

In this week's Australian Stock Market Report, Dale discusses whether the stock market is bullish or bearish in the short term. He also looks at the stocks of interest that our subscribers sent in following the market commentary.

Most Australians are now back at work, the Australian open is over and the “big bash” cricket is just winding up, as is Chinese New Year celebrations. And let’s not forgot, the kids are back into a routine with school recommencing last week.

The December/January period tends to be the time of year when overspending occurs, with many playing catch up over the next few months, while for some it is the rest of the year before it starts all over again. Unfortunately, many Australians are on the debt treadmill and the “buy now pay later” regime is not really helping, as many are spending next week’s pay check before they even receive it.

We tend to avoid looking at our financial situation during the festive/holiday season. But now the kids are out of your hair, it’s time to think about getting on top of your financials, so you can get off the debt treadmill, which you can do by setting up a budget for the year ahead.

Right now, we are in a very low interest environment except for the dreaded credit card, which can charge interest as much as 20 per cent or more. Given this, I would encourage you to start eliminating any short-term, high interest debt you may have accumulated and then to start paying off any other debts you may have. Once you clear away your debts, you can start practicing the three laws of wealth creation that I outline in my latest award winning book, Accelerate Your Wealth, which includes spending less than you earn, investing wisely and leaving it alone so your investments can grow.

So what were the best and worst performing sectors this week?

In stark contrast to last week, which was a sea of red across the market, this week most sectors have performed well. Information Technology and Healthcare have been the best performers, and are both up over 2 per cent so far. These were followed by Consumer Discretionary and Industrials, which are both up over 1 per cent.

As for the worst performing sectors, Energy is down 3 per cent so far while Utilities is down over 1 per cent and Communication Services is just in the red.

Looking at the ASX top 100 stocks, the best performers include Janus Henderson Group up over 7 per cent, Reliance Worldwide up over 4 per cent, as was Boral and Magellan Financial. The worst performers so far this week include Oil Search down over 10 per cent, Treasury Wines Estates, which has continued its slide, down just under 8 per cent while IOOF Holdings is not far behind.

So what's next for the Australian share market?

I have often said that a week can be a long time in the market, and this week has been no exception. Last week, I indicated that the market had started to move down as I was expecting. Yet after falling heavily on Monday, it spent the next three days rising to erode the fall of the previous four days.

Right now, neither the bulls nor the bears are in control and, as such, it is best to sit on the sidelines and refrain from buying until a direction is confirmed. What I am confident of is that the market is medium to longer term bullish with the All Ordinaries Index likely to rise to around 7,600 points or above this year. I am also confident our market will outperform the US stock markets.

For now, good luck and good trading.

Dale Gillham, chief analyst Wealth Within
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