In a slightly worrying sign, the Australian stock market is struggling to post a decent rally despite the occasional positive lead from the US. Robust commodity prices are not even helping the cause. We are not sure what to make of it at this stage. There is obviously some concern about the bank’s exposure to groups like Centro and the impact of rising bad debts in an indented economy. But unlike the US, the Australian economy is still growing strongly...maybe too strongly for those who like their interest rates low.

From a technical perspective, the broader market is becoming oversold and on this basis we could experience a rebound in the next few days. However when the mood is negative oversold conditions can persist. On a fundamental basis many sectors of the market were trading well above reasonable valuations towards the end of last year so on that basis, the sell off should be welcomed.

The next step for the market will be to digest earnings results, due throughout February, and management commentary on the outlook for earnings. Until then we would expect continued nervousness and market volatility, especially if news out of the US continues to be poor.

Given this volatility, this week we provide an overview of all the stocks in our portfolio. While we are comfortable continuing to hold a large portion of the stocks, we are cutting our losses on a number of exposures that have not worked out.