Support not holding

The old resistance zone of 4700-4750 does not seem to have provided much support. If the All Ords closes under 4700 for more than a day or two more, it will not auger well for the near term. What's more, an intra-day low on the All Ords below 4651 (tomorrow) will turn the XAO Indicator red. As we know from experience, when the XAO Indicator turns red, we need to be cautious - to say the least. For what it's worth, I continue to believe that the 4620 level will provide good support but that will be in the face of a red XAO Indicator. Given the increasing international volatility (Korea, Ireland, China 'tightening'), you would have to say that if the XAO Indicator turns red tomorrow, you might prefer to watch from the sidelines.

All Ords testing support

The All Ords is now at the bottom of the range of the old resistance zone - 4700. Since early October the All Ords has hardly spent any time below 4700. Look at the chart below and you will see what I mean. A couple of days below 4700 could portend lower prices. And significantly, the XAO Indicator will turn red below 4640 (dotted green line).

On the chart above I have also drawn in the common retracement levels of the move down from the April high to the May low. As you will see is quite common for the price to oscillate between the common retracement levels. If this were to continue to hold true then the All Ords could bounce from here (being the 61.8% retracement level). If it does not hold here, then the next support level could be around 4620 (being the 50% retracement level). To me that looks the most likely although at that level the XAO Indicator will be red.

All Ords through resistance zone

The All Ords is well and truly through the resistance zone we have been watching for many weeks - but it has been a struggle. Theoretically we should roll on now until the next significant resistance - 5000. The 5000 level represents a 50% retracement of the move down from the all time high in November 2007 to the March 2009 low. If the market gets there, it will be the second test of that level - the first attempt was in April this year. The XAO Indicator remains blue and while it does so we should hold on to our long positions. Hopefully any pull-back will find support at the previous resistance of 4700-4750. Here are two charts. One is a daily of the All Ords and the other a weekly to give you a longer term perspective. Click charts to enlarge.