Baillieu Holst strategist Mathan Somasundaram said the local share market could fall a further 100 points this week before stablising. It has already erased all of this year's gains.

"Global investors are worried that the Australian dollar has further to fall with a strengthening US economy and weaker China outlook compared to stimulus expected in Europe.

"The view is that the Australian economy is expected to grow slower than expected despite the currency weakening and holding a triple-A credit rating because of domestic fiscal policies and unemployment worries while global growth remains soft," he said.

Mr Somasundaram said there are five key elements which support his view that Australian equities are likely to get belted this week.

1. Roubini Global Economics said it expected Australian growth to hit 2 per cent next year with China slowdown and our currency to drop by 20 per cent to drive negative sentiment

2. Global investors always sell Australian assets and buy safe US assets or those linked to recoveries in Europe and Japan when they want to sell China.

3. We have seen some index changes with some small stocks going in and out of the indices, which will affect small cap funds.

4. School holidays started this week and most institutional investors are away, hence there is a lack of substantial buying support

5. Global portfolio transition away from Australia is driving the selling pressure in our markets and put further pressure on the Australian dollar.

The S&P ASX 200 Index has erased this years gains after a sharp sell off in September - one month out from the end of the US Federal Reserve's stimulus program.

Driven by bank stocks – the high yield star performers of the bull market rally over the past few years – the benchmark index has fallen more than 5 per cent since it hit a 12-month high of 5658.5 three weeks ago.

The Australian dollar is down from just over US93¢at the start of this month to around US88¢ on Tuesday.