XAO Technical Analysis

Re: XAO Analysis

Nick Radge said:

Bullish interpretation anyone...

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great post nick, you show clarity in the panic.

much enjoyed and appreciated.

Nizar depending on the next rally and how it fairs to the sellers. I am also looking for higher low or divergence to get in long. I personally think the market is changing it's behavior. I don't think it's changing for the better either! time will tell can't be one sided in any picture no matter how one sided it seems.

Re: XAO Analysis

a broker i read suggested that if the XJO closes below 6330 this week the primary trend will start to be down?

is anyone able to help me understand why this might be the case and what it might mean.

when i saw the market rallying all day yesterday i thought i saw August repeated but am now not so sure?

any ideas would be greatly appreciated.

Re: XAO Analysis

I think it's pretty simply. The Market was due a correction and it has come but due to factors such as the drought (see record wheat prices), the recent centro and RAMs disasters (Sub Prime issue) and the fact that the US is close to recession the positive signs for buyers just don't exist (I know there's others).

Yesterdays carnage was much less severe than it would otherwise have been due to bargain hunters (myself included) If the Aussie market doesn't follow Wall St's very small turn around then we could see more drops.

Speaking for myself I've purchased select parcels during every drop since prices started falling last week, thinking each fall would be the last and hoping the shares I purchased would buck the trend. As we've all seen, very few shares have done this since late last week. If I don't see a turn around I'll be taking my money (and my bat and ball) out of play, as I've already lost on the last few falls and can't continue to do that without murdering my capital. I think other bargain hunters will start to be less inclined to jump back in and you may see more falls but without yesterdays recovery.

We'll know in 30 minutes.

Re: XAO Analysis

I would have expected a much harder rally today. Most of the stocks are just filling the gap from yesterday. The SPI is really struggling to do that though. We've had a lot of big name stocks break down from triangles, and they can't even retest those levels. After thinking I would be all long today, it just looks like another opportunity to position for shorts.

Re: XAO Analysis

That was most dissapointing. All of my stocks started great, but ended just awful

Bloody yanks, when are they going to rally already!
A nice +300 good points tonight would be just great, +3% on Zn, 6% on Copper, I'm starting to doubt that it's going to happen :

Sigh, when is it earnings reporting season here

Re: XAO Analysis

nikki said:

a broker i read suggested that if the XJO closes below 6330 this week the primary trend will start to be down?

is anyone able to help me understand why this might be the case and what it might mean.

when i saw the market rallying all day yesterday i thought i saw August repeated but am now not so sure?

any ideas would be greatly appreciated.

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Hi Nikki

6330 is the closing price on the weekly chart for 3 weeks ago and pretty close to four weeks. A bit of a support level. I have shown the level (horizontal line) below on the daily. What is also interesting is yesterdays low failed to penetrate the neckline of a head and shoulders and today backed further away.

Not to say it cant turn around again though. But I've been noticing strength in the greenback (maybe orchestrated), as posted yesterday and am leaning to a bit of a recovery since Goldmans posted a good result yesterday and provided Bear Stearns and Morgan Stanley are not too bad.

Hang in there Nyden. It'll come better mate. I promise... truely.

Re: XAO Analysis

thanks whiskers and tronic72 for your views.

similarities with the august correction is amazing when you compare today's candle as well.

good luck everyone.

Re: XAO Analysis

I'm still concerned about the XAO though it does seem to be a resilient little bugger. Nonetheless, we have had a reasonably muted response on the DOW and S&P500 to the central bank's half a trillion dollar bailout that is in play for whoever needs salvation - what a Christams present!!!
Shouldn't the markets have rallied with more gusto on this news? If the market doesnt believe this is the answer, then the XAO will surely follow the S&P down further?

Apologies for the messy looking chart, but I've borrowed an analysis technique that is used by David Petch who does his own t/a for subscribers as well as posts to http://www.321gold.com/archives/archives_authors.php?author=David+Petch

The technique involves the use of multiple Bollingers to gauge major turning points.

You can see that at (1) the XAO has reached unprecedented levels of volatility for this bull run, and warns of the potential for a intermediate top (note the distance between the upper and lower 55 day MAs (green bands).

Also note that when the upper green band runs a lot higher than the price action, there has historically been a correction. I have pointed these out at "Top".

Note, also the long term stochastics breaking below 80 confirms our correction.

You can also see that the August correction followed a "top". However, the lower BBs in this case came up to meet the price, allowing for a volatile and sharp correction.

What we have now is different. We have a top that followed huge market perturbations. Our upper BBs are gently curving down now and the down leg has not waited for a squeeze with the lower green MA. It much more resembles the top put in May 06 but this time we have more bearish sentiment in the market. It almost looks like it is rolling out of a top and is ready to commence a down leg - I'm still skeptical about calling a top since the Aussie economy is bubbling along nicely. Still, very interested in what Jan-Feb will bring

Note the Stochastics still show further falls are possible despite the strong support at these levels.

One other concern from chart posted Whiskers. Note, in the August correction the ADX climbed up to about 42 indicating a strong move but getting to the overdone side. So far this time the ADX has only just now started turning up, so it potentially has more room to move on a downward correction.

Re: XAO Analysis

$20shoes said:

I'm still concerned about the XAO though it does seem to be a resilient little bugger.


It much more resembles the top put in May 06 but this time we have more bearish sentiment in the market. It almost looks like it is rolling out of a top and is ready to commence a down leg - I'm still skeptical about calling a top since the Aussie economy is bubbling along nicely. Still, very interested in what Jan-Feb will bring

Note the Stochastics still show further falls are possible despite the strong support at these levels.

One other concern from chart posted Whiskers. Note, in the August correction the ADX climbed up to about 42 indicating a strong move but getting to the overdone side. So far this time the ADX has only just now started turning up, so it potentially has more room to move on a downward correction.

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I do agree with you $20shoes.

In the short term though I think 5 red candles in a row is getting a bit overdone. Unless it is the start of a wholesale crash which I don't see coming yet, I reckon we are due for a little recovery till the market works out whether it needs to go lower again.

I'm still inclined to agree with the EW's like wavepicker that about Feb will be a cruical time with the likelyhood if a correction were to occur it would be then.

Re: XAO Analysis

$20shoes said:

Note the Stochastics still show further falls are possible despite the strong support at these levels.

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Notwithstanding that further falls are certainly possible, how does the stochastic show this? It's just a mathematical construct.

Re: XAO Analysis

A simple observation from a non-chartist. Looking at the XAO and the major US indices, they have all put in lower highs and lower lows. At what point do you call a bear market?

Re: XAO Analysis

dhukka said:

A simple observation from a non-chartist. Looking at the XAO and the major US indices, they have all put in lower highs and lower lows. At what point do you call a bear market?

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I think it's pretty clear. This time around, the correction seems to have a completely different feel to it. There is a point of realisation here in Australia at least, that if a top 50 company can go belly up, than any can. And that of course means absolutely no premium paid at all on anything.

Property trusts and financials look to now be in a long term down trend. BHP and RIO have blown up and off on now dead merger/ takeover rumours. Energy is having counselling about it's personality problems. Energy retailers are downtrending. I just can't see new highs from here for a while. There is just nothing left there. I'm not saying it wont, but it would take something extraordinary to see us at all time highs any time soon.

What makes this correction different for mine, is that it wasn't coming off an all time high, it was coming off a lower high. It is more like a break down, rather than a dip.

Perhaps the final nail in the coffin will be profit growth slowing in retail. But... trade it as you see it, as it comes etc. But to me, it will be a bit uphill trading long if the sectors themselves are downtrending.

Re: XAO Analysis

A series of bearish patterns for the newbies to observe. A pull back may stall at head and shoulders neckline or the down sloping line of the symetrical triangle or maybe neither but a good place to consider. Cheers

Re: XAO Analysis

wayneL said:

Notwithstanding that further falls are certainly possible, how does the stochastic show this? It's just a mathematical construct.

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WayneL, point taken as it is indeed just a lagging indicator. However, the main point I was trying to make was that the XAO is not necessarily oversold at these levels, as it has more obviously been in previous corrections when price came down to lower trendline.

Re: XAO Analysis

$20shoes said:

WayneL, point taken as it is indeed just a lagging indicator. However, the main point I was trying to make was that the XAO is not necessarily oversold at these levels, as it has more obviously been in previous corrections when price came down to lower trendline.

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Cheers $20shoes,

Thanks for the clarification.

Re: XAO Analysis

Just to clarify my position regarding my last chart, that count was an alternate suggestion and is not the primary count I think headlines the market. For this to be valid we'd need to see 6700 breached again and with the wobbles being seen at present and lack of Santa's appearance I don't think too much upside is plausible.

Below is what I have been running with for a number of months and suggests a return to the August lows. A break of those lows places us into bear market phase of which I think we will see a 1989 - 1994 repeat scenario. Copper, being a lead indicator for economic expansion, is breaking down through significant supports. Interest rates are rising and will soon be at an important level from an asset allocation perspective. 2007 has been a year of 'a few good stocks'. Remove those and its actually been a bad period. My 2c...






This post may contain advice that has been prepared by Reef Capital Coaching ABN 24 092 309 978 (“RCC”) and is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

Re: XAO Analysis

< "Spare me the mantra that the “fundamentals” are sound. Credit is the ultimate fundamental." >
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wayneL, your mantra reminds me of something I learnt during a Coxwain course.
the Captain of the 'Titanic' made his maiden speech 2 weeks before the Titanic sank -

"I have guided many ships in my 25 years as a Captain and frankly it has been a rather uneventful journey" .....and we were told that the Titanic was classified as 'fundamentally sound' days before it's final voyage.

Then I guess the ship would have had a chart room

Re: XAO Analysis

Nick Radge said:

Below is what I have been running with for a number of months and suggests a return to the August lows. A break of those lows places us into bear market phase of which I think we will see a 1989 - 1994 repeat scenario. Copper, being a lead indicator for economic expansion, is breaking down through significant supports. Interest rates are rising and will soon be at an important level from an asset allocation perspective. 2007 has been a year of 'a few good stocks'. Remove those and its actually been a bad period. My 2c...

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So true. The rather obvious underperformance of the small caps suggests the market is held together by a few stocks. Smokes and mirrors.

Re: XAO Analysis

If the XAO does fall back towards 5400, then it will well and truly have broken out of the channel it's been in since early 2003.

On a weekly chart, there's some bearish RSI divergence showing, which I think supports that possibility as well.

The blue line around 4300 at the moment is a longer term trend from after the '87 crash, and the red one around 3600 is the very base of the same trend. The slope of those trend lines is around 6.8% pa, compared to the 19% pa of the current channel.

GP

Re: XAO Analysis

hacheln_mice said:

So true. The rather obvious underperformance of the small caps suggests the market is held together by a few stocks. Smokes and mirrors.

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Yep. There is just no momentum left in this market. Each rally has less and less to it in terms of the amount of stocks participating. BHP, CBA, WOW etc are fooling anyone that thinks the Bull is still running. Negative divergence grows everywhere you look.

The chart below is the 10 day Avg market breadth. Its been the same pattern since August last year. We get an broad oversold rally from a meltdown then each rally after that is with less and less stocks participating until we get a implosion again and then the pattern repeats.

Only good thing that can be said is every time we get down here we really hard. For a while