Spectre forms of further falls

The higher low and lower high observed on the daily chart that I alluded to in the last post looks like a pennant on a weekly chart of the All Ords. Such consolidations sometimes form mid-way in a trend. A fall out of that pennant would indicate that this decline could reach 4200 (XAO). It is of course by no means certain - a reversal here is quite possible - but it is looking increasingly likely that in 2-3 weeks time the All Ords will be at around 4200. A close below the lower trend line on the pennant should act as a trigger for further selling.

'Big black' points to rocky week ahead

We have seen this pattern several times in the past few months. The market starts a promising rally and then reverses sharply with a big black candle i.e. a candle which opens on its high and closes on its low.  The close today below Friday's low on the All Ords indicates that further falls are likely this week. What's also happening now is that the market appears to be 'winding up'. This is evident from the higher low and lower high recently formed. Such 'winding up' is often followed by a sharp move. Which way that will go is not yet evident but the simple fact is that there are no weekly signals pointing up and as of today, the daily signals are pointing down including that the Stochastic is now in overbought territory. So I would have to say that the evidence favours the bears and that at this stage the only thing the bulls can rely on is hope.

Bullish signal on All Ords

It looks like the market has 'drawn a line in the sand' at around 4520 (All Ords). Today's price action created the '3 River Morning Star' candlestick reversal pattern. With the Stochastic only just starting to rise, this seems like quite a bullish signal. The first potential resistance is the downsloping line joining the 2 ellipses shown on the chart below. If the market reaches that point it will be the first time in the decline from the April high that the market has tested that '2nd' ellipse resistance. If it breaks through that resistance, it will be the first sign the market wants to go much higher. It is also at around that level that I expect the XAO Indicator to turn blue again.

All Ords signals an intent to reverse

Having held at the support level of 4560, the All Ords made a potential candlestick reversal pattern Thursday - an "engulfing bearish" candle. A positive opening on Friday (particularly taking out today's high of 4584) would indicate the market is attempting to mount a rally possibly to around 4750. A close tomorrow below today's low (4537) should mean lower prices next week. A close below the June 27 low of 4508 would be particularly bearish.

All Ords finds potential support at 4560

4560 on the All Ords seems like a good level for shorts to take profits landing as it does right on the ellipse support. It might just make another attempt to rally from here. If it does the target would be around 4750 before it hits resistance again. Clearly though the bias is to the downside and the proper view of any rally is that it probably won't last and that ultimately we will test the late June lows - at least.
Today's price action is not a candlestick reversal pattern so there is no candlestick support for the above view although some large cap stocks I follow like BHP and ANZ did make potential candlestick reversal patterns today. On BHP for instance, a close tomorrow above yeterday's high of $43.91 would indicate a resumption of the rally.

Dow makes potential reversal pattern

The forshadowed resistance on the Dow (12,750) is holding - so far. Friday's pattern (Harami candlestick) indicates a potential change in trend. A new closing low on Monday on the Dow would probably confirm a reversal (of some kind) of the current uptrend.
     On the All Ords, although the chart picture is different, the signal we are looking for is similar. The All Ords is now right in the first level resistance (yellow ellipse). That ellipse has turned back rallies 3 times in the decline from the April high. Friday's low on the All Ords is a key. A close on Monday below Friday's low (XAO 4675) would likely spell the end of the current rally. If that were to happen, we will probably see a second candlestick reversal signal form.

Will resistance continue to hold All Ords?

The All Ords continues to hover around resistance but is not falling. A close above 4687 (XAO) Friday or Monday would invalidate the candlestick sell signal of a couple of days ago and the All Ords will then probably head for the next resistance at around 4800. Last week, the weekly chart confirmed a candlestick reversal pattern so it's possible we have started a new significant up trend. In the meantime the foreshadowed resistance on the Dow does not seem to have held. Breaking through the ellipse resistance signals higher prices on the Dow although it will first have to get through signficant resistance at around 12,750.

All Ords, Dow right on resistance

The All Ords is right on the first level of resistance after a handy little rally. Those who bought in at the lows in late June have obviously been taking profits at these levels. The All Ords has now made a candlestick reversal pattern on the daily chart, so it should now turn to correct the rally. If it keeps pushing up though, it should find greater resistance at 4800 (XAO). However, if it does turn here as it is threatening to do, it could one of two things. The correction could be quick before it turns to strive for the next resistance level at 4800 or it could continue down to test the June lows - and beyond. We should know over the next couple of days.

The Dow is also right on resistance but the support for any correction on the Dow is not that far away at around 12,300.