Monday, April 26, 2010

NZX 50 Gross Index: Ready for a Correction?




Just looking at the NZX 50 Gross Index, since mid February it has put on nearly 10% since a market correction in early 2010 dropped the index by a similar percentage.

The index has flattened over April and seems to be taking notice of the similarly flat economic outlook. I see a poor economic "recovery" with flat to less than zero for a couple of years at least (I'm always this cheery on a Monday) and consider that the stockmarket is a little overoptimistic in terms of its overall direction.

If you look West you can see the DOW index (see 2 year chart below) as a more extreme example of ours. It is close to its September 2008 pre-crash levels and you cant tell me their economy is in a better state now, in fact things are worse - see debt levels for an answer there.



As stockmarkets are traditionally 6 months ahead of the economy (that is what the experts say but are they really?) our market seems to be expecting a good recovery but I think investors will be disappointed when reality sets in over the August reporting season and the coming 12 months of real economic facts and figures.

Watch for more opportunities to buy over the coming year as even this flat market will see some good buying opportunities when the stockmarket drops.

Hey, I could be wrong but the market looks overbought.


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