How low can the All Ords go?

[rederob]

'zactly

Not only that, a price chart delivers logical points of price (and some say time) whereby we can determine proof or disproof.

I have not seen a price chart for an equity or commodity that did not have logical points of price.
Would you like to explain the price points that are on charts which are not logical?
I won't go into the temporal issue: It's self evident that prices exist at points of time.
If something is on a chart, what are we proving?
Or is it your tenet that a chart portends eventualities?

I agree in part with tech/a. Not wholly, because good analysis provides an edge. And this edge is expressed in probability terms.
Thus the near term probability of the US economy rebounding into prosperity is exceptionally low. So the probability of the US dollar increasing in value (on a sustainable basis) near term is also quite low.

We can extrapolate these probabilities to selected equities and commodities - such as gold - and draw some conclusions about price outcomes: I prefer the simplicity of "higher" or "lower" to exact price.

So, to suggest that forecasting the allords is prove, disprove, prove etc., is, in my view a cop out. Moreover, as the allords is in decline, we can sequentially determine the probability of further declines. Those probabilities are high: That is, the probability that sequential lows will be hit over coming months is high.

Toss into this mix the known unknowns, that is the unwinding of derivatives post subprime, and then unknown unknowns (that is, if its not a depression, what will it be), and the probability factors are advanced over time.

That's why I'm reasonably confident of the allords hitting low 4Ks and, agreeing with Wayne that 3Ks are in play. But as months pass, I would not rule out the high 2Ks as a chance.

 

[wayneL]

I have not seen a price chart for an equity or commodity that did not have logical points of price.
Would you like to explain the price points that are on charts which are not logical?
I won't go into the temporal issue: It's self evident that prices exist at points of time.
If something is on a chart, what are we proving?
Or is it your tenet that a chart portends eventualities?

We are attempting to prove a hypothesis, whatever that hypothesis may be. That hypothesis could be something like; that a trend as defined by the trader will continue far enough to result in a reasonable R/R trade. Disproof would be that it didn't. Technically significant points on a price chart, allow us to define the hypothesis, and subsequently the proof, the disproof and the parameters by which the hypothesis will live or die.

That's why I'm reasonably confident of the allords hitting low 4Ks and, agreeing with Wayne that 3Ks are in play. But as months pass, I would not rule out the high 2Ks as a chance.

2k's? Lord, the number that dare not speak its name! OK Now that someone else has put it on the table, I'll go along with that. But my word, that's an uncomfortable thought for the vast majority.

 

[rederob]

Wayne.
We must be talking about different things.
The chart shows price history, and a myriad of technical indicators can be based on these prices.
Are you hypothesising on a forward view?
As distinct from determining the probability of an event?
You have lost me, poor simple thing that I am.

 

[wayneL]

Wayne.
We must be talking about different things.
The chart shows price history, and a myriad of technical indicators can be based on these prices.
Are you hypothesising on a forward view?
As distinct from determining the probability of an event?
You have lost me, poor simple thing that I am.

Well I'm speaking generically as both are considered to a greater or lesser degree by most technicians. I'm too simple to do either to a masterful degree, so rely on a little bit of game theory and money management to eek out a crust.

However, I'm not so simple as to not realize that those indicators you mentioned pretty much suck. Price action, wave structure and purported support and resistance are my caper.

 

[MRC & Co]

any analysis (F/A, charts etc etc) is only looking at the PAST.
you want to look at the future, do futures.
How long is that piece of string???

Huh? I dont get it

Any analysis is trying to predict future price, no matter what your instrument, stocks, options (though not always the direction with options, but with some degree of direction involved), futures.

 

[wayneL]

any analysis (F/A, charts etc etc) is only looking at the PAST.
you want to look at the future, do futures.
How long is that piece of string???

Trading futures is no different to trading stock in the simple sense.

The term "futures" has got nothing to do with the future in the price speculation business. The term relates to commercial interests locking in a price on a future date.

 

[Logique]

Nobody knows how low for the XAO, and it's a question that will be answered in offshore markets - ask them how low they will go.

I still haven't given up yet on the XAO holding above 5000. However if that level fails, some likelihood of it fallling to test 4000. But by that time what will the franked dividends be runing at - double digit % ? So it can't keep going down forever.

 

[jonojpsg]

I guess if we think that over longer periods of time, earnings are the key driver for stock prices, then we would need to see earnings reports around the middle of this year and then the end of the year to see where we might be heading. Obviously if earnings hold up, then one would assume that prices will also hold up, otherwise as Logique says yields will reach double digit and everyone will want in which will push prices back up.

I can't see how the All Ords can reach 2ks??? THat would imply prices for BHP of sub $20, CBA at around $20s and so on. Of course, if world economy implodes, people stop buying everything apart from essentials, commodoties collapse, then these prices may happen. Does anyone know?

Of course the known unknowns and unknown unknowns may well kick us in the butt until we get to the 2ks - I hope not

 

[jonojpsg]

Just had a look at the All Ords back to 1990 and drew a trendline through the lows from 1990 until now and it predicts a target of 3750. Through the tops gives around 4300, so I guess this might well be a reasonable range to look at as it takes out the excesses of the debt boom era of the last 4 or 5 years.

 

[dhukka]

Nobody knows how low for the XAO, and it's a question that will be answered in offshore markets - ask them how low they will go.

I still haven't given up yet on the XAO holding above 5000. However if that level fails, some likelihood of it fallling to test 4000. But by that time what will the franked dividends be runing at - double digit % ? So it can't keep going down forever.

The assumption here is that currently forecasted dividend levels will be realized. 4 months ago, the best (I use that term loosely) analysts on Wall Street said that Citibank would not need to cut its dividend since it generated $20 billion in free cashflow. What happened to that? Many other financial companies have slashed their dividends and in some cases eliminated them altogether.

The US has hit a turning point in the economy and in terms of earnings. Earnings visibility is extremely impaired at cycle turning points. Analysts are notoriously late to the party. 12 months ago 4Q07 S&P500 earnings were forecast to show double digit growth. Even as late as mid November analysts were predicting 4Q07 earnings to rise 3%. Now with 99% of S&P500 firms having now reported, earnings show a -31% decline.

We are not yet there in terms of earnings in Australia The Australian economy is still strong so you can expect strong earnings through the end of June 2008. However there are signs of weakness in Aussie bank earnings, you'll see more of that in May when the other 3 majors report but the real weakness wont show up until next year IMO.

Reliance on current earnings and dividend forecasts should be taken with a grain of salt as they are next to useless at turning points in the earnings and economic cycles.

 

[dhukka]

I guess if we think that over longer periods of time, earnings are the key driver for stock prices, then we would need to see earnings reports around the middle of this year and then the end of the year to see where we might be heading. Obviously if earnings hold up, then one would assume that prices will also hold up, otherwise as Logique says yields will reach double digit and everyone will want in which will push prices back up.

I can't see how the All Ords can reach 2ks??? THat would imply prices for BHP of sub $20, CBA at around $20s and so on. Of course, if world economy implodes, people stop buying everything apart from essentials, commodoties collapse, then these prices may happen. Does anyone know?

Of course the known unknowns and unknown unknowns may well kick us in the butt until we get to the 2ks - I hope not

I see the 2ks on the XAO, CBA trading in the 20's and BHP in the teens as very conceivable. Consider that P/E ratios become very depressed at the end of bear markets. At the end of the 1966 -1982 bear market the P/E of the market was around 6 - 7 times trailing earnings. So if you think CBA is cheap trading at 11 times earnings just remember that history suggests it can get a whole lot cheaper.

The above is not a forecast, I don't expect the XAO will see the 2k's but I wouldn't be surprised. FWIW I'm looking for a bottoming somewhere between 3400 - 3800.

 

[Junior]

I see the 2ks on the XAO, CBA trading in the 20's and BHP in the teens as very conceivable. Consider that P/E ratios become very depressed at the end of bear markets. At the end of the 1966 -1982 bear market the P/E of the market was around 6 - 7 times trailing earnings. So if you think CBA is cheap trading at 11 times earnings just remember that history suggests it can get a whole lot cheaper.

The above is not a forecast, I don't expect the XAO will see the 2k's but I wouldn't be surprised. FWIW I'm looking for a bottoming somewhere between 3400 - 3800.

So you're looking for XAO to lose a total 50% of it's value from top to bottom? That's a massive call, has that happened in the past 100 years?

I would've thought with our country's vast natural resources this is highly unlikely.

 

[dhukka]

So you're looking for XAO to lose a total 50% of it's value from top to bottom? That's a massive call, has that happened in the past 100 years?

I would've thought with our country's vast natural resources this is highly unlikely.

Yes, the low end of my range would imply a -50% decline in the XAO. However as stated above I could easily conceive of a bigger fall. From it's peak in the late 60's to the trough after the OPEC oil crisis in 1974 the XAO lost more than -65%.

 

[gfresh]

So you're looking for XAO to lose a total 50% of it's value from top to bottom? That's a massive call, has that happened in the past 100 years?

Yes, a few times, or quite close to it.. How many times in the last 100 years have the world's largest financial institutions been in so much trouble? Maybe less than that.. This is what we are dealing with, at least a once in 30 year event, maybe the sort of thing that only happens twice in a century.

I know we're really talking about our local All Ordinaries, but seeing as it's difficult to get such a long timeframe chart for Aus, here's the US..

 

[vishalt]

Long term support for the Dow @ 500 points LOLLLL.

 

[ta2693]

The market can be ridiculous on one way. why can it not be ridiculous on the other?

 

[rederob]

Long term support for the Dow @ 500 points LOLLLL.

Umm
That's 1000points.
So, will the gold and DOW hit the same level?
What if the answer is yes?
Not this year tho.....

 

[Sean K]

The market can be ridiculous on one way. why can it not be ridiculous on the other?

Need to check the long term charts of the general indices. There have been some serious bumbs but only a few relatively sustained. Going through a serious down right now, but for how long is anyone's guess. However, long term up, not long term down...

 

[wildmanchris]

I subscribe to Huntley's who's view was that the Jan 22 low of 5200ish was the low to rally off to new highs going forward.

This has now proven not to be the case.

I have heard some say that it is now heading to 4700 before it bottoms.

We have so many "expert" opinions - some say black, some say white.

Statistically, 50% will be right and 50% will be wrong.

I think maybe more downside over the next 6 months at least.

What do people think???

Got a free trial with Huntleys so I looked at back issues out of interest. I wasnt really impressed with some of the calls they made - and from memory underperformed the market last year with their portfolio? Someone correct me if im wrong.

One of their December newsletters was saying the correction was over, and buy back in - and in each article they seemed to forget what the had been talking about the week before.

Glass was always half full, and it clearly wasnt over the time period I was reading.

I also love their buy recommendation on AIO from 9 all the way down to $3.50.

 

[Junior]

The market can be ridiculous on one way. why can it not be ridiculous on the other?

Calls for the all ords to reach 2-3k's seem too extreme a scenario for my money. Look at our biggest financial insto's for example...despite major credit problems they're still expecting huge profits. Then look at mining...commodity prices smashing through record highs as demand continues to grow, unaffected by a global financial crisis.