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.

All Ords reaches on 'Make or Break'

The All Ords has reached the upper level of the 'make or break'. It needs to hold here otherwise there is wide open space between here and the next and more significant 'make or break' support at around 3750.

XAO Indicator back to red

That didn't last long, after turning blue on 1 September, the XAO Indicator is back to red. Meanwhile the Dow is nearing an important support zone (10,800 to 10,500). If that zone doesn't hold we could see some some sharp falls because in the near term, the next support levels are at around 9,000 on the Dow. But the $64 question is whether or not the current support zone will hold. Of course nobody knows but I continue to believe that the August lows (or thereabouts) will hold - at least in the near term. This means around 10,500  on the Dow and between 3,800 and 3,700 on the All Ords. If we don't hold those levels then in all likelihood we will test the GFC lows and possibly go beyond even those lows over time.

Make or break on All Ords at 4075

There is some support for the All Ords at around 4075 but if it fails to hold convincingly, the market will probably test the August lows. Beyond that we will need to wait and see.

XAO Indicator turns blue but resistance looms

The XAO Indicator turned blue today but there is some decent resistance ahead. The All Ords has now retraced 50% of the decline from the April high. That's already solid resistance. Added to that we have a downsloping trendline from the April high that is about to come into play. And nearby, we have the ellipses produced by the software marking the resistance for the reaction rally. How all of this plays out remains to be seen but I will say this. If Friday's close remains above 4281 (the weekly high 3 weeks ago) I will be more bullish than bearish.