Market Wrap: What Can Trends Tell Us?

What Can Trends Tell Us? 

By Dale Gillham, Chief Investment Analyst at Wealth Within 

Through no fault of their own, investors are sometimes getting it wrong when reading the commentary about what’s happening in the property market within Australia, particularly the area related to finance approvals. And frankly, I’m not surprised if you too are unclear.

A client told me that after reading two different sources about housing finance data, he wondered what to make of it. One report said that the number of home loan approvals rose one per cent in August, ahead of the 0.5 per cent rise expected by the market. So he thought this is likely to be good for the property market. But another report revealed that the number of housing loan approvals for owner-occupiers fell by 3 per cent in the same month and is at a 15-month low. In addition, the overall value of housing finance approvals fell one per cent compared to the prior month of July. Records show they are at their lowest level since April. So you too may be thinking ‘what-the?’

If you are interested in the property market, I suggest you go directly to the source to check the facts. The Australian Bureau of Statistics research indicates that in trend terms, the number of commitments for owner-occupied housing finance rose one per cent in August 2017. To understand the bigger picture, the graph on the ABS website displayed the total number of owner-occupied dwellings that were financed (in the summary of findings), which indicated that the trend continues to rise.

Whether you are looking at shares or property, remember a graph of historical trends can reveal much more than one month’s data ever will.

What do we expect in the market?

The solid rise this week on the Australian market means we are now seeing some light at the end of the tunnel for Aussie shares. The All Ordinaries Index has traded up strongly off lows at around 5,700 points and this week the market continued above the important level I referred to in a previous report at 5,836 points.

A further strong rise next week would indicate that the market is likely to head towards 6,070 points, towards our next target of between 6200 and 6400 points. Often it’s the heavy-weight companies that take the market higher, however, this time the smaller end, along with the mid-caps made the first move. This is often followed by rises in stocks at the top end, therefore traders ought to be prepared for their buy rules to trigger.

To find out more, visit www.wealthwithin.com.au 

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