What's next for the Australian share market

Best and worst performing sectors this week

Materials and Consumer Staples have been the best performers so far as they both up nearly 2% with Communication Services not far behind up more than 1.5%. The worst performing sectors include Energy, which is currently down more than 2% followed by Healthcare and Utilities, both of which are currently just in the red.

Looking at the ASX top 100 stocks, the best performers this week include ALS Limited, which is a surprise as the stock is up around 14% yet its PE ratio is nearly double the market average and its EPS is relatively flat.

Therefore, the fundamentals for this stock are not really supporting the move, which has seen this stock shoot up by 100% since March of this year. My guess is that retail investors are pumping up the stock for fear of missing out, which also appears to be the case for Fortescue Metals, which is up almost 8% so far this week, while Magellan Financial Group is up just under 7%.

The worst performers include IOOF Holdings down more than 10% followed by Qantas down more than 7% and The Star Entertainment Group down nearly 6% so far this week.

What's next for the Australian share market

The All Ordinaries Index has continued to move cautiously and is still lacking any real direction. That said, if the market closes higher than it opened this week, we will see the highest weekly close on the market since early March, which is a good sign.

As I mentioned last week, the market is moving more cautiously than confidently, with momentum in many of the top 100 companies slowing while retail traders are pushing up stocks in the Small Ordinaries and Emerging Companies Indices. When this sort of situation occurs, it means the market is running out of steam and is likely to fall away.

Again, investors should exercise patience rather than jump in, as there will be plenty of time to profit once the market settles. Given that the All Ordinaries Index has failed to trade above the high of 6314 points set on June 9, once again, it is looking unlikely that there is sufficient time for the market to trade up to my target of around 6600 points before it falls away.

Right now, the pendulum is swinging towards the probability that it will begin to fall away very soon into the next low, which will be below 5800 points.

Get stories like this in our newsletters.