Market Update
Its been a shaky week in the world market last week and i think it deserves a mention. The China market has been falling quite sharply during the week, this lead to a fall in the US and European markets which in turn lead to a fall in the Australian market. The All Ords has fallen for 4 consecutive days and each day the drop was bigger, this essentially wiped out about 1 month of gain on the index.
That being said, the US market rallied yesterday night, up 1.19% so hopefully it rallies again next week. Bear in mind that the ASX is closed on Monday for Queen’s Birthday so if the US and Europe market performs well Monday next week, we should see a strong recovery of the Australian market.
There’s still 3 weeks till expiry and historically it takes 4-6 weeks for the market to recover. The market has fallen 147 points (2.28%) over the past 4-5 days Bear in mind that the BankWest Economist is always on edge, he was on edge when Shanghai correction came and he’s been keeping an eye out this time.
The Shanghai drop was 395 (6.56%) - this was a quick correction, down for 1-2 weeks,and back up in 2-3weeks.
 The last big movement was 10th May to 14th June 2006, this was a 549.5 (10.27%). This went down for 1-2months, and up in 4-5 months.
If something like this is happening the market will be sideways and its even better for options writers
If you look at the XAO there is a weakening in the market in terms of ‘internal strength’ just look at the RSI.. so watch outÂ
If the market continues to drop for the next 3 weeks we may want to consider doing longer contracts, rolling down or closing out, I guess in 2-3 weeks time we’ll know what to do.
