Correct on correction
by Peter Switzer
Another weak day on Wall Street and the market is bound to be coping with this correction phase for at least a couple of months but keep the faith. It is, at this stage, a correction as we predicted in early May.
As Michael Heffernan, from Austock Securities pointed out on my Sky News Business Channel program, “this is a great opportunity". He likes top-notch companies such as the banks along with a number of resources companies, such as Iluka and Mineral Resources.
But the question is how long before this pullback, which should become a correction with at least a 10 per cent drop for the index, turns around?
The simple answer is that it’s anyone’s guess but my secretive charts person — I don’t know if this techo is male or female as I simply get these chartist views sent to me, which is quite mysterious — agrees with Lance Lai, who also has been tipping a sell-off.
The secretive chartist says the next drop-stop is 1222 on the S&P 500 but it won’t hold. And interestingly, the chartist explains the pictures say the US dollar is heading up! That will surprise a few investors but could be good for local shares down the track.
By the way, overnight the Dow fell 21.87 points, or 0.18 per cent, to 12,048.94 and the S&P 500 was 5.38 points, or 0.42 per cent, lower to 1279.56.
My economist view is that we will be in negative territory until we see some kick up in US economic indicators, which should take a few months to start green shooting again, but I do think it will happen.
So, we’re in buying opportunity territory and while you could look silly in the short-run, provided you’re lining up with good quality companies, especially with a good record of paying dividends, then in the medium-term you should be laughing all the way to the bank.
By the way, it can only be a shock event that could rock this analysis in the short-term but if such an occurrence doesn’t eventuate, then the China and demand for resource stocks play will take centre stage again.
Good quality resource stocks also look like a smart play for the medium-term investor.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Thursday, June 09, 2011
The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.