Updated chart

Charts 6 Sept 2012

Updated chart

Updated chart showing resistance at 4400 on XAO

If the All Ords takes out the long term resistance at 4400 it will turn the XAO Indicator blue. It will also show the most recent Indicator change to red to be a false move which should prove bullish. If it breaks through the next resistance is the trend line at around 4600.

XAO Indicator turns red again

XAO Indicator turns blue

No change to XAO Indicator

Updated chart

We're back in the danger zone

The XAO Indicator turned red yesterday but what really concerns me are the consecutive lows the market is making while the stochastic indicator is oversold. We often see panic collapses in these circumstances, so hold on to your hat. It also means that the ultimate low is not too many days away now. However, even though the low may only be a few days away, it could be many, many points away from here.

New chart

No real leads on All Ords

It's no secret that this market is going nowhere at the moment so there has been very little to blog about. My guess is that we are in for another couple of weeks of indecision. While the XAO Indicator remains blue, we can expect this market to edge higher, but until it breaks through 4500 convincingly we need to remain skeptical that the trend has changed. Even 4400 is proving difficult enough, the market has been knocked back from there 5 times since August - but the declines from that level are getting shorter and shorter which tells me the market is building for a strong burst.

We have reached support (of sorts)

There is support for the All Ords right here (4220) and the stochastic is back in oversold territory. So this is as good a place as any from which to mount a challenge to the significant resistance ahead (4450-4500). That is tough resistance and even if we do get through, we have the long-term downsloping trendline (drawn from Nov '07 high to Apr '11 high) starting to come into the picture at around 4700. If the support does not hold here, we could be in some trouble.

Resistances are lining up to knock the All Ords back

4450 - 4500 is a strong resistance level on the All Ords for many reasons. First, 4450 is a 50% retracement of the April high to the August low and we are nearly there. This will be the second attempt at the 50% retracement - the first occurred on 1 Sept 2011 which preceded a 550 point decline into the October low. Next, the 200 day moving average comes in at 4475. The area near the 200 day ma often acts as a support/resistance level. Third, the 4500 area acted as a strong support zone in June and July this year not to mention that it is near the low formed in March this year. Fourth we have a MOB ('make or break') coming in at 4500 and fifth, we have the ever reliable blue ellipse right on that level as well. That is all not to mention that traders just love false breaks and today we broke the downsloping trendline - will that turn out to be a false break? And of course the stochastic has found its way back into overbought territory just to put the icing on the cake. It is starting to look too perfect - the 'utopian sell zone'. If that is not utopian enough, we get the news today that in Europe the sugar plum fairy will grant everyone's wish and make the debt problems disappear. Of course the Dow will follow through with a strong night, tomorrow we will make a spike high opening, the smart money will back up the proverbial truck and load up the short positions and get set to make a killing. Could it be that easy? My gut feeling says no, that we are going to continue higher, but the chart says otherwise. By the way, today the XAO Indicator turned blue. This is the second time it has turned blue in the decline since April. In 2008, it turned blue 3 times in the downturn - 3 false starts - before finally getting it right the fourth time in March 2009. What's more, in 2008 the market had 2 cracks at the 50% retracement level (4/2/08 and 19/5/08) before it finally cracked itself and collapsed. Will history repeat itself? I don't know but Tim Finn (Split Enz) was in the news the other day. Was he signing History Never Repeats? Not sure.

All Ords to make another run at resistance

With the All Ords having got back into oversold territory on the Stochastic, and today's move giving a candlestick buy signal, we are set to test resistance again. First we need to get through the downsloping trendline which knocked the market back last week. We are right on that trendline now so don't be surprised to see a pause here. The yellow ellipse resistance (4375) is now not as relevant as it was last week. The real resistance lies around 4500 or just under that. I suspect there are lots of sellers ready to push the button at that level.

Gold's correction may not be over

Gold is not looking like it is ready to attack the all time high anytime soon. In fact the converse seems true - the rally seems to have run out of puff after retracing 38% of the decline from the all time high. The targeted support level seems to be around $1450 (Comex). The stochastic is back in over-bought territory and has turned down and to top it off, candlestick analysis has now given a sell signal. The $1450 - $1500 area seems a much more solid place from which to launch a serious rally again being where the 4th wave of the lower degree ended - a common place for a correction to end.

Stiff resistance at 4375

4375 is shaping up as the resistance to beat. A failure to get through that level has the potential to knock this market back to around 4000. If the market gets through 4375 heavy resistance lies 100 points above that. I will want to see that level (4475) broken before I would be prepared to call the correction over. The crystal ball says breaking 4475 is not likely but we should get time to make up our minds if the market gets there.

A little moment of truth for the stockmarket

We are about to find out whether this rally is going to be sustained. We are now at a resistance point and the stochastic is back in over bought territory. What the market does while the stochastic works its way back into oversold territory will tell us whether we have turned the corner.

All Ords takes first positive step

Today the All Ords finally broke out of a narrow, down-sloping channel which began at the beginning of September. That's the first - and minimum - step to changing trend. The trendline is not a signficant one being only a parallel line to the bigger trendline sloping down starting on 22 July. The line I would like to see broken is the next one up which provides resistance at around 4200 (XAO). And there is an ellipse resistance at that level also. So I would say the bears will have another go at around the 4165 to 4200 zone. How the market behaves when it reaches that zone will indicate what this market really wants to do next.

Gold lands on support

On 26 September, Comex Gold landed on the first support level. In a bull market - which is gold - you would expect this 'first level' support level to hold and for market to now resume the uptrend. If this correction is over, the all time high of a few weeks ago would be the minimum target with the first resistance lying at around $1,715.

Anatomy of a falling market

On 30 March 2011, I wrote that we might be witnessing a replay of the 2007/08 market crash(http://asxindicator.blogspot.com/2011_03_01_archive.html). A little later I observed that the 'Japan earthquake' crash in March '11 had nothing to do with the earthquake and that something more sinister might be afoot (http://asxindicator.blogspot.com/2011/04/xao-indicator-turns-blue.html and http://asxindicator.blogspot.com/2011/05/el-momento-de-la-verdad-for-stockmarket.html). That observation turned out to be correct. I thought the rally from the March '11 low might turn out to be a 'sucker rally'. Indeed it turned out to be so. Now, I think this market has one more sucker rally left. The chart at the moment tells me we might test the August lows, but we really want to rally once more - up to maybe 4400 - 4500 on the All Ords. Check out the period from January to May 2008. That's what I think is around the corner - just one more bear rally - after that, you all know what happened. But of course that is 'crystal ball gazing' and my crystal ball is no better than anyone else's. The market could quite easily go ahead and crash right here.
If you are not scared yet, read on. I see things like this. The March 2007 correction was a precursor of the August '07 mini-crash. The August '07 mini-crash was a precursor to the January '08 crash and the January '08 crash was a precursor to a massive market decline leading into the global financial crisis. Well, the March '11 mini-crash seems to me to have been a precursor to the August '11 crash. The worry is that the August '11 crash was a precursor to something far more ominous coming our way in the next few months. And if that is not enough to scare the bejeebers out of you, consider this. It is quite possible that the whole 2008 GFC might have been just a precursor for something much more significant around the corner. I don't mean to frighten you, but one needs to be realistic. What I am saying just might come to pass.
OK, that's enough gazing at the stars. Here's today's chart. The 'make or break' at around 4075 continues to hold our market. If it falls below that level, I have said before we could be looking at around 3700 - 3800 before we get to the next support.