Good signs on the All Ords

The little correction from the recent rally seems to have ended in a support zone (blue ellipse on the chart below). The Stochastic seems to have worked off the overbought condition and is now back in the oversold zone - a good place from which to launch a rally. To top it off, we got a nice little candlestick reversal today. If we can rally through last week's highs, we could reach the 'real' resistance for this market. That lies at around the 4500 - 4550 level. On the flip side, keep an eye on yesterday's low (4145). A close below that low will indicate lower prices to come.

All Ords hits first resistance

The All Ords today hit the first resistance level at around 4360. I see 3 possibilities from here. The first is that we have a brief pause for another day or two before resuming the move up - to at least the second resistance (blue ellipse - which by the way, moves down as the days pass). The second possibility is that we now correct the move up from last week's low. This could involve a move down of at least 200 points. The third possibility is that we now resume the down move and retest last week's low. For what its worth I favour the first possibility but if we don't get a new high this week, that would be cause for concern. Now, if we do get a new high, the big problem is that we will reach serious resistance fairly quickly. 4450 on the All Ords is the 50% retracement level of the move down from the April high to last week's low. I suspect that the area between 4450 and 4550 is going to be very difficult to break through.

'People are dumb, panicky, dangerous animals'

One of my favourite films is Men in Black. In case you don't know, it's about men dressed in black suits who secretly protect the Earth from aliens. In the film, the new recruit (Will Smith) asks the veteran why the government doesn't tell us about aliens. He says: 'Why the big secret? People are smart. They can handle it.' The veteran played by Tommie Lee Jones replies: 'A person is smart. People are dumb, panicky, dangerous animals.' The past week in the stockmarket proved Jones to be correct - at least in so far as panicky and dangerous goes. Whether the hordes of sellers also turn out to be dumb remains to be seen but it reminds me of the advice that a successful orchardist gave my father many years ago. At the time, the area was in the grip of a serious downturn and many orchardist were pulling out their pear and apple trees and selling off their land but the successful orchardist was planting new trees. When dad asked him why, the orchardist replied: 'When everyone else is panicking and pulling out their trees, that's the time to start planting'. Anyhow, here's today's chart of the Dow. The support level that I alluded to in the previous post lasted just one day and triggered a rally of just 62 points. Last night, the Dow landed on more substantial support at 10600. This triggered a more substantial rally. Whether that support now holds remains to be seen but the Aussie market and many large cap Aussie stocks have made strong reversal patterns on the daily chart. If 10600 does not hold on the Dow, the next support level is 9500.

Dow lands on support

It was a massive drop on Thursday on the Dow but it has landed right on a support level at around 11,380. We could see a bounce here, possibly to the June lows of around 11,900. If the Dow bounces, the All Ords should also bounce. The first resistance on the All Ords is around 4400 with more significant resistance at 4500 - the underside of the June-July lows.