'Uh-oh'. They were the opening words in yesterday's article in the Herald Sun by one of the country's most respected economic journalists. The words summed up his reaction to the news from the US that a 'double-dip' recession is back on the cards. That news explains the hesitation last week by the All Ords to follow the Dow and the Shanghai Index in turning blue. It seems that rather than lagging those two indexes, our market was trying to tell us to be wary.
The 4550-4650 level is proving difficult to get through and that level it seems has somewhat of a history.
In Sept and Nov 05 it acted as resistance holding back a rising market. In Sept 08 it provided temporary support to a very weak market. In Nov 09 and Feb 10 it provided support again. And this year it has acted as resistance three times so far in May, June and August. 
Now the thing is that the XAO Indicator will turn red again very quickly if the All Ords drops below 4360 (refer to chart on left - click chart to enlarge). That is only 62 points from today's close of 4322.
The last time the XAO Indicator went from blue to red in quick time was in September 2008. That time we had only 5 blue days. That was followed by 4 months of red bars and a fall in the All Ords of over 1700 points or 35%. Now I am not suggesting that is about to happen again. But here's the value of the XAO Indicator. When the bars are red it is a time for caution - sometimes when the bars are red the market can fall dramatically. Will keep you posted.
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