Commodities remain resilient
After ten weeks of gains, the All Ordinaries index has finally slid down this week to a low of 6,215 points, before rising to close higher. As I have mentioned in previous weeks, I expected the market to fall for a few weeks in order to find support for the next rise.
Amongst the top 100, Evolution Mining (EVN) and Newcrest Mining (NCM) where the top performers, up around 6% and 3% respectively. The Materials sector has performed strongly in recent months, up over 12% this year, which comes as no surprise. In fact commodities, as a whole, are looking strong right now.
Iron ore remains bullish and after breaking through US$77 earlier this year, the next target is around $90, therefore I expect iron ore will continue to rise in the coming months. Oil also appears to be quite strong given that Light Sweet Crude Futures fell well over 40 per cent by the end of 2018 but is now trading at $54 a barrel.
A production cut to both Saudi and US oil, and a squeeze on Venezuelan and Iranian production has supported the rise in oil prices, which is likely to continue another 10% to 15% to $60 to $65 a barrel. Australian oil companies, such as Santos and Woodside Petroleum, have benefited the most from rising oil prices, gaining 25 per cent and 10 per cent respectively, and I see both continuing to rise in the coming months.
Gold remains bullish after trading through an important resistance level at around US$1,280 and if it continues to trade up strongly over the next couple of weeks, we could see it trading around US$1,500.
Looking at how the other sectors performed this week, Consumer Staples and Communication Services are both up over 2%, while Energy is down over 3%. Origin and Oil Search are both down over 2% in what I believe is a short term move, given that the Energy sector looks bullish over the medium term.
So what do we expect in the market?
The market has finally started to fall, although I believe the move down will only be for one to two weeks with a price target of between 6,132 and 6,000 points by the end of March.
That said, it could fall slightly further in price and time. These falls are a normal part of a bull market, and provide an opportunity to re-assess your portfolio and get set up for next move up with confidence.
There are many great opportunities that will present themselves in the coming month, especially in the Energy and Material sectors.
Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in book stores and online at www.wealthwithin.com.au
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.