When do you expect the next Correction?

[krisbarry]

I don't reckon we will get a correction till at least July. Look at the new super rules. Squillions of dollars is going to flood the ASX over the coming 5 months. Baby Boomers off loading investment properties and dumping bucket load of cash into super. Ohh what a lovely time to be in the market

 

[Kauri]

In the Saturdays West Australian....

A growing number of investment fund managers and analysts are warning that Australia’s fast-running stockmarket is closing on another sharp correction which could wipe up to $200 billion from share prices.

They say the market is heading for a correction of as much as 15 per cent, but more pessimistic experts fear another crash comparable to 1987 is around the corner.

The market’s S&P-ASX 200 hit a record high yesterday and has now climbed more than 20 per cent since the last big correction sent it 11 per cent lower last May.

The recovery has been buoyed by record liquidity, strong superannuation inflows, steady interest rates and relentless takeover activity.

In the past month alone it has gained 7 per cent, including 1.6 per cent this week, valuing the broader market at $1.35 trillion.

However, many financial players have turned bearish as the index closes on another key barrier, the 6000-point level. They cite concerns about widespread risk complacency and stretched share valuations.

452 Capital co-founder and fund manager Peter Morgan likened the current climate to the lead-up to the 1987 crash.

“If you had a timeline on it, you are going into 1987 but you are not yet in September 1987,” Mr Morgan said.

“There are two things in the big equation, there is firstly a lot of liquidity both domestically and globally and, secondly, risk is being priced at a very low level ”” both those things are dangerous.

“I don’t think it is a lot different to what happened in the 1980s, but the 1980s boomed for three or four years before the markets corrected.”

Research by the Bank of Canada highlighted yesterday that the Australian equity market was facing a number of headwinds despite being supported by a strong commodity price cycle, a solid domestic economy and high-dividend yields.

The bank said risks to the market included a possible commodity price downturn, higher interest rates and the expensiveness of Australian shares, saying they were now selling at the same price per earnings ratio as global stocks.

Nomura Australia equity market strategists Eric Betts said the reporting season could be a “last hurrah”.

“Once the reporting season is out of the way you will probably have crossed the 6000 barrier and people may take that as a time to reassess their positions,” Mr Betts said, adding that he expects a correction of 8 per cent to 10 per cent.

“My prognosis for the market is that we could well have a pullback in the short to medium term of 10 to 15 per cent but I don’t think we will see the almighty collapses of the 1980s,” Argonaut Securities executive chairman Charles Fear said.

However, Mr Fear warned that flatter commodity prices and rising costs could put pressure on the profitability of the big miners.

Bell Potter Securities director of research Peter Quinton agreed that the Australian sharemarket was over-extended.

“I am very much in the camp that we will get a correction, but I am equally in the camp that it will just be a technical correction of 10 per cent or a bitmore,” he said.
TRACEY COOK

 

[>Apocalypto<]

“I am very much in the camp that we will get a correction, but I am equally in the camp that it will just be a technical correction of 10 per cent or a bit more,” he said.
TRACEY COOK

That's what I'm thinking!

 

[Uncle Festivus]

Correction any day now, just watch the DOW for clues I think

 

[Bush Trader]

Correction any day now, just watch the DOW for clues I think

Hi all

This chart demonstrates the loss of momentum and developing divergence

The question we mask ask ourselves has the relationship between the all ords and the dow changed, think back to the Sept Qtr where the relationship broke down to some extent.

The following is an extract reported by FN Arena yesterday

"Credit Suisse holds the view, demand for Australian shares will outstrip supply significantly this year. The Broker even uses the term "unprecedented". The broker believes last year demand already outweighed supply, despite the large T3 offer, and this has pushed up the share market's performance into double digits again. This year the gap should be much, much wider.
If Credit Suisse's calculations prove correct circa 4% of the total market capitalisation of Australian equities will be looking for reinvestment in the market this year. All these funds come from excess cash (paid out through dividends or share buybacks), mandatory superannuation (with changes in legislation adding more to the basket this year), corporate mergers and acquisitions, private equity deals and -not to forget- the government's Super Fund.
Last year, the strategists argue, the overall PE for the Australian share market rose by 10%. Credit Suisse sees a direct relationship with the demand/supply balance. Considering the broker believes the imbalance for 2007 will be four times larger as in 2006, it would be easy to see the market PE to expand further this year.
The fact that the bond market has now priced out any rate hike in the near term will no doubt contribute to such a scenario.
There is, of course, a third scenario whereby share prices retreat to create room to move further upwards again.

At a time when several commentators are pointing out that underlying momentum in the US equity markets appears to be waning, and the market is starting to look "heavy", investors can possibly draw confidence from Credit Suisse's analysis that any possible weakness will make the overall market simply more attractive. "


Cheers

 

[>Apocalypto<]

I don't reckon we will get a correction till at least July. Look at the new super rules. Squillions of dollars is going to flood the ASX over the coming 5 months. Baby Boomers off loading investment properties and dumping bucket load of cash into super. Ohh what a lovely time to be in the market

very valid point

 

[chansw]

Shares' show of strength
February 25, 2007

http://www.theage.com.au/news/business/shares-show-of-strength/2007/02/24/1171734070237.html?page=fullpage#contentSwap1

The ASX200 has charged through 6000 points in a sizzling run - but where to from here? Richard Webb investigates.

PHEW, what a scorcher! No, not the weather, the sharemarket. Shares are up almost 6.5 per cent since the start of the year and at this rate are on track to post a monster 50 per cent gain for the year as a whole.

As anyone who has followed the sharemarket for any time will know, shares can't keep going up at 1 per cent-plus a week indefinitely.

Last time we had this sort of gain over a full year was in 1986-87 when the market put on 90 per cent in the 12 months to September before producing one of its biggest crashes a month later.

Actually, shares have been even stronger than these recent figures indicate as it was a pretty shabby start to the year ”” the market is up almost 10 per cent since the second week in January.

This is, of course, great for share investors ”” that's one in every two adults in Australia ”” and practically everyone else too, as most superannuation funds have investments in the local market.

But it can't continue. All good things must come to an end, right? The ASX200 has crashed through 6000 points and looks like staying there. Is it time to take a few profits? The answer from share experts is a resounding "no" ”” well, not yet anyway. But don't expect shares to keep heading up in a straight line either. Here's why.

While the sharemarket has bolted ahead recently, thanks in part to the billions of dollars of private equity money swirling around and which is now swooping on retail giant Coles, it has only just kept pace with company earnings. That's why shares are no more expensive than a few years ago and in some cases are cheaper.

Shane Oliver, AMP Capital Investors chief investment officer, says the sharemarket, even at its record closing high on Friday of 6036.1, sits on a prospective price-earnings ratio of 15.3. The 10-year average for this measure is 15.2 and the market hit 18.3 in 1999 at the height of the tech boom.

So we are at an average price level for the past decade relative to the profit of listed companies. That's certainly not expensive.

But there is one big rider to all of this. While these experts expect shares to post a solid gain for the year, they believe it will be closer to 10 per cent than the 20 per cent of the past three years. The main reason is the expectation that company profit growth will slow to about 12 per cent this year.

That means we are almost two-thirds of the way there yet we are less than two months into the year. This is when predicting where the sharemarket is heading becomes tricky.

Don Williams is chief investment officer at fund manager Platypus. He thinks the very strong and consistent bull market will continue but that does not mean we are not due a few corrections.

"We've tracked this bull market against previous bull markets and it's better than the one in the 1990s and not as good as the 1980s," he says. "But volatility has been significantly lower ”” we've had a very consistent 'up market'. We got a couple of 10 per cent corrections last year and we will get at least one of these this year."

When? That's the $64 question. Mr Williams again: "We all know there's going to be a correction but we can't quite figure out when. We've seen very impressive top-line growth in this current reporting season and the fundamentals for the sharemarket are as good as they have been, but there is nothing genuinely cheap out there."

CommSec chief equities economist Craig James agrees. "If shares are outperforming earnings in a big way, then that's when you should be really worried," he says. "But they haven't been. Even so, I think if we get a period of consolidation once these profit results are over, I don't think it would be a bad thing at all."

Michael Heffernan, senior adviser at Austock, says the recent bumper profits, continued run of private equity takeovers and takeover speculation, huge share buybacks from companies such as BHP Billiton and a strong economy have driven shares up. But he says the market cannot keep this up.

"While it's great while we are on the run, the market is not going to keep going up at 1 per cent a week like it has been doing so far this year," he says. "It might be like last year where we ran to 15 per cent by May and finished 19 per cent up at the end of the year."

Mr Heffernan echoes most of the other experts in saying there is nothing fundamental to worry about ”” just yet.

"The profit results have been absolutely fabulous," he says.

Rebecca Sullivan, retail strategy manager, ABN AMRO Morgans, says earnings expectations were high at the start of the reporting season, yet corporations had in the main delivered results above that and those that had not were generally one-off cases. "It's hard to find a sector that's struggling," she says. "Earnings have pushed this sharemarket higher and we see no threat to earnings at this stage. We expect the sharemarket to stay strong for the rest of the year; we are pretty comfortable all round about it."

Ms Sullivan says the sharemarket has "just been playing catch-up" in the past few weeks.

AMP's Dr Oliver says that of the 116 companies he tracks that have already reported their profits, a solid 48 per cent beat market expectations. Another 34 per cent were in line, with 18 per cent below. Companies' comments on profit outlook have been equally strong. "Of those companies that have made comments, 32 were clearly positive outlook statements against only seven that were negative," he says.

Dr Oliver expects profit growth overall will come in about 19 per cent year on year for the December half, against 17 per cent growth expected before the profit season started. "Company earnings expectations for 2007 and 2008 have been lifted by about 2 per cent as a result," he says.

So what next? Platypus' Mr Williams reckons the market could run another 200 to 300 points higher but then he expects a correction back below 6000. "Longer term, the market could struggle through the federal election with all the uncertainty it will cause," he says.

Austock's Mr Heffernan is looking for 6400 by the end of the year, but AMP's Dr Oliver believes we could approach 7000.

"We haven't seen any signs of the euphoria you get when a market gets near its top," he says.

"It looks increasingly likely that the sheer weight of money will push the sharemarket higher than earnings growth this year, and that means we could be pushing towards 7000 by the year end."

Now that might be a time to take a few profits.

 

[CanOz]

What does everybody think now, given the big selloff on the Chinese markets, and the XJO selloff in the last two hours?

Could this be the correction?

Cheers,

 

[constable]

What does everybody think now, given the big selloff on the Chinese markets, and the XJO selloff in the last two hours?

Could this be the correction?

Cheers,

doubt it .....more like a bit of profit taking after mondays stellar run.

 

[CanOz]

doubt it .....more like a bit of profit taking after mondays stellar run.

The run on Monday was on resources and energy...for the most part they were spared today from as much blood letting. Nearly 9 out very 10 stock hit the daily limit of 10% loss.

Cheers,

 

[professor_frink]

The run on Monday was on resources and energy...for the most part they were spared today from as much blood letting. Nearly 9 out very 10 stock hit the daily limit of 10% loss.

Cheers,

Dow is off nearly 50 and the S&P off 7.25. Still a long way to go before they open though.

 

[CanOz]

Dow is off nearly 50 and the S&P off 7.25. Still a long way to go before they open though.

This is going to be messy, its got to be, every market is so toppy!

Have you got some good links where i can get the US indexes? I'm a bit isolated over hear....almost feel like getting a room at the Shangri La just to watch the carnage!

Cheers,

 

[professor_frink]

This is going to be messy, its got to be, every market is so toppy!

Have you got some good links where i can get the US indexes? I'm a bit isolated over hear....almost feel like getting a room at the Shangri La just to watch the carnage!

Cheers,

15 minutes delayed quotes from futuresource should do the trick-

http://www.futuresource.com/quotes/index.jsp

select from the top symbols list-it'll have most of what you're looking for

 

[barnz2k]

sorry for being a noob,
but would the recent drop be this 'correction' or are you refferring to just the Aus market. Is it like in relation to interest rates etc when they talk about an adjustment?

Maybe this General drop would at least delay a local correction?

 

[CanOz]

sorry for being a noob,
but would the recent drop be this 'correction' or are you refferring to just the Aus market. Is it like in relation to interest rates etc when they talk about an adjustment?

Maybe this General drop would at least delay a local correction?

We were speaking of a correction that started in China and went around the globe. The ASX we thought would be affected too. Not sure what you mean by adustment but generally they refer to the deep dips in the share markets uptrend as a correction. This has no relation to interest rates as such, at this stage, but could have if it evolves into a bear market and global recession.

Anything else feel free to ask stupid questions and i'll try not to give stupid answers. Lots of people here to explain things to newbies.

Cheers,

 

[insider]

Hey guys... how often do corrections occur? When was the last correction period? How long it last? I'm confused whether to sell or hold...

 

[theasxgorilla]

Hey guys... how often do corrections occur? When was the last correction period? How long it last? I'm confused whether to sell or hold...

Some food for thought...

I count 4 significant corrections during this bull run so far. They have involved losses in value on the XAO/XJO indexes of between 4% and 10% and have lasted between 3 and 6 weeks, depending on their magnitude and velocity.

I come back to the reason why everyone seems to think this one is different...the degree to which we and other markets globally experienced a single day loss on Wednesday (or their Tuesday) was greater than anything most markets have seen so far during their respective bull runs.

Personally, I'm waiting for confirmation either way. This is trend following (or at least it is to me). In order to participate in 70% of the move you've got to be prepared to give 10-15% at either end.

 

[insider]

Some food for thought...

I count 4 significant corrections during this bull run so far. They have involved losses in value on the XAO/XJO indexes of between 4% and 10% and have lasted between 3 and 6 weeks, depending on their magnitude and velocity.

I come back to the reason why everyone seems to think this one is different...the degree to which we and other markets globally experienced a single day loss on Wednesday (or their Tuesday) was greater than anything most markets have seen so far during their respective bull runs.

Personally, I'm waiting for confirmation either way. This is trend following (or at least it is to me). In order to participate in 70% of the move you've got to be prepared to give 10-15% at either end.

YEAH i'M THINKING iF i LOSE ANOTHER 10 PERCENT IT MAY BE A SURE SIGN... THANX DUDE

 

[surfingman]

Hey guys... how often do corrections occur? When was the last correction period? How long it last? I'm confused whether to sell or hold...

Hi Insider,

I am new to this but been looking at this as part of my trading plan, the downward trends and corrections both circled, there are 5 stronger areas and a large amount of smaller corrections over the year which arent circled, the current correction is hard to predict by anyones knowledge at this stage from what ive researched, the US economy is a very strong weight towards what will happen so keep a close eye as usual on their markets. This is my approach might be wrong if so please correct me...

 

[surfingman]

asxgorilla you are talking about the bull run since october?