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The views expressed in this report are those of Lesley Beath and may differ from Morningstar's views.

Reviewed this week

• Overview
  Further frustration is likely. More...
• Australian Agriculture (AAC)
  Low risk. More...
• Ten Network (TEN)
  Impressive chart pattern. More...
• Qube Logistics (QUB)
  A near-term pause. More...
• Westfield Group (WDC)
  Remains constructive. More...
• BHP Billiton (BHP)
  Will give guidance. More...
• Commonwealth Bank (CBA)
  At resistance. More...

Please note: before making an investment decision, Morningstar recommends you read the fundamental research available on these stocks.

Disclaimer: To the extent that any content in this report constitutes advice, it is general advice that has been prepared by Lesley Beath without taking into account the particular investment objectives, financial situation and particular needs of any individual investors. If necessary, you should consult with a licensed investment adviser or dealer in securities such as a stockbroker before making an investment decision. Opinions expressed herein are subject to change without notice and may differ or be contrary to the opinions or recommendations of Morningstar as a result of using different assumptions and criteria.

Overview

A 7% rally in the US market last week took the S&P500 back to, you guessed it, the 200DMA. It is in the same situation as it was in late October/early November. In Australia, the All Ords, after falling back below the April downtrend and the 56DMA on November 22, is now back above both resistance points.

This skittish behaviour is hard to handle, giving investors cause for fear, followed by bouts of optimism. It remains a tricky situation.

There are some positive developments, but I think that the volatile range trading that we have experienced over the past few months can continue.

The positive developments?

A large number of equity markets are holding above their August-October lows. This is an important support level as it marks a significant peak in fear, and what I believe is the 'panic low'. In many instances the sell-off in the week ended November 25 threatened to violate those lows, but it was not to be. Last week's rally has, at least in the short-term, rescued global markets from the threat of a push below those important lows. European markets were the best performers with Italy, France, Germany, and Spain up between 10% and 11%. The Australian market gained 7%, led by the Financials. The latter is approaching its 200DMA once again, as is the dominant Banking sector.

Now the big question is whether or not last week's rally will last.

At this stage I don't think we will see a substantial burst to the upside, we are more likely to get continued oscillations within a broad range. But the market is extremely fickle at the moment and things can change at the drop of a hat. The past couple of weeks are testament to that. Three weeks ago, risk appeared to be to the upside, but then it shifted to the downside a week later. Now, the market is in an optimistic mood again.

But I don't think we should be complacent. I noted last week that I was concerned about the large number of false upside breaks (in the Australian market) that had been registered over the past couple of weeks, and that they would create a significant overhead barrier. Well, that remains the case with a lot of stocks. There are some exceptions, but some further follow through is required to suggest that a rally of significance is unfolding.

I had been of the opinion that equity markets could push higher into the end of the year and into early 2012 - nothing spectacular, just a gradual improvement. But I noted in mid November, when the potential for a pause became apparent, that I expected my positive view to come under pressure. And it did. But it was when the All Ords broke back below its April downtrend, and the 56DMA, that the facts warranted a change in view. But here we are again, just one week later, and the All Ords is back above the downtrend and the 56DMA.