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Market barometer: Tracking patterns may precede changes

Friday 30th June 2000

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AAPT

Major sharemarkets are showing a curious common pattern of tracking closely around average values that have been persisting for some time.

This sort of behaviour often precedes sharp trend change, although it cannot be foretold whether such a turnaround will head up or down.

The trend direction will probably take its cue from the market's guesstimate on when the US Federal Reserve will eventually call it quits on raising interest rates.

The Dow Jones industrial average is lodged at its now longstanding average of 10,500 points. The S&P 500 index is doing much the same thing at its benchmark average of 1450. The Nasdaq appears to be around the 4000 mark as its new average zone.

Not all US indices are drifting sideways, however. The Dow Jones transportation average has weakened off toward 2600.

London's FTSE-100 belongs to the Dow Jones industrials' camp in clinging to its own average of 6400. The odd man out in our part of the world is the ASX-all ordinaries, which has recovered from its April Nasdaq-linked lows and has started to suggest 3100 is the launching pad of a rally.

The New Zealand sharemarket is mixed. The top-40 capital index is having a hard time making it away from the 2000 area.

But the smaller companies' capital index has staged a creditable rally from April Nasdaq-linked lows and is hovering in the 5100 region.

Our smaller companies may represent a good cyclical buying opportunity again, although much depends on how sustainable New Zealand's economic growth figures turn out to be.

Major companies are all over the show. Telecom seems headed for 700cps, possibly because its AAPT investment (illustrated) has fallen all the way back to the $A5 area where it started before Telecom climbed on board. Carter Holt Harvey is stagnant at around 180cps.

Fletcher shares show evidence of uplift as Paper's disappearance draws nigh. Energy is rocketing and may yet see a return to its giddy $8 highs of late 1998 when it was a rage stock. Forests has sagged a bit from its 80-plus cps rally highs. Building could be interesting, with pickup evident from the 210cps level suggested.

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