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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
  Risk remains high. More...
• Ausdrill Limited (ASL)
  Scope for further weakness. More...
• NRW Holdings (NWH)
  Break of the uptrend. More...
• Campbell Brothers (CPB)
  High risk, but no confirmed Sell signal. More...
• Forge Group (FGE)
  A medium-term peak. More...
• BHP Billiton (BHP)
  At the 200DMA. More...
• Rio Tinto (RIO)
  No change in outlook. 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

Global markets continue to present a risky profile.

The major concerns, as they have been for some time, and as were outlined in the last report, are the action of the US T-Bond/S&P500 ratio, and the VIX. The chart of the former was presented in the last report; the ratio was little changed over the week, but it continues to exhibit an improving profile, suggesting that risk in the equity market remains relatively high.

The VIX is still hovering above long-term support and risk is to the upside; this suggests that the next significant change in investor sentiment is likely to be negative.

So what happened to the potential 'inverse head and shoulders continuation' pattern in the S&P that was highlighted a couple of weeks ago?

Well that has not been negated at this stage, but the lack of follow through and the action across a number of other indices is disconcerting. As mentioned last week, sections of the US market are stalling as they test significant resistance - the Dow Transports and the Nasdaq Composite are in close vicinity to their 2007 peaks, as is the Russel 2000.

And the US S&P Banks Index, which was holding above its 200DMA last week, has since slipped below that support.

We are also moving into a less friendly seasonal timeframe.

In addition, the US dollar strengthened last week, and as dollar rallies have, over the past couple of years, been associated with an increase in risk aversion, this could be another warning sign. I know that I said last week that there have been times when a countertrend rally in the dollar has not had an adverse effect on the equity market, and that could well be the case now, but we need to weigh up the risks.

And for now, although many global equity markets, including Australia are now sitting on their 200DMA, there is little evidence to suggest that an impulsive move to the upside is about to unfold. As noted last week, in regard to the domestic market, 'there is scope for a near-term bounce. At this stage I do not believe that any bounce will push beyond the mid April high, but as always we will be guided by action as it unfolds.'

That view still holds, and there is room for further frustration as the forces of supply and demand, as represented by support and resistance, continue to be fairly evenly balanced, giving rise to a ranging market.

So there is really not a lot to say this week. I still think that the Australian dollar, gold and silver, and oil have registered medium-term peaks. And whilst the latter should be viewed as a relief for global consumers, it could mean that we are moving out of risk assets, equities included.