>When analysing the market, it is important to always review the historical patterns to assist in forming a view of what may occur in the future. It is a well known fact that the All Ordinaries has a history of making a major low approximately every 4 years, and with the last 4 year low occurring in March 2003, it is obvious that we are well over due for the current 4 year low.
The longest period in history for the 4 year low to unfold on our market is 64 months between July 1982 and Nov 1987 and currently the market has been unfolding for 61 months since March 2003. Given that the average length of the 4 year low is around 50 months, it is evident that the low could occur at any time. While the opportunities will be plentiful when the low is confirmed, investors will need to exercise caution by only investing in large companies that generally lead market recoveries.
So what can we expect in the market?
This week the market continued to sustain its downward trend falling to a low of 4880 on Wednesday 16 July, which is now the 8th successive week that the market has fallen. While it is rare for the market to fall for such a sustained period I still believe it will rebound over the next one or two weeks.
Given the level at which the market fell to this week, it is also possible that we may see an end to the current fall and the market return to being bullish, however, only time will tell. Given that anything is possible in the current market conditions, it is important that investors protect their capital in preparation for the next bull run, which I do not believe is too far away. I expect the market to find support around 4800 points although if it falls through this level it could fall to the next support level of around 4300 points.
This report is from Dale Gillham , chief analyst of share investment company Wealth Within
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