XAO Technical Analysis

[theasxgorilla]

Re: XAO Analysis

Just a quick post of my musings for the XAO.

Good trading to all

Wavepicker

Thanks for the analysis WP...there seems to be, what's that word, confluence of measurements around the 4600-4700 region. That fits somewhat with my gut feel which suggests to me that the XAO can't fall too much further, whilst it still feels like it's not done yet. How that for some precise licked-finger-in-the-wind analysis

 

[wavepicker]

Re: XAO Analysis

Thanks ASX, this seems to be a very clean long term impulse in the XAO. In so far as this bear market goes, there are a few points that are important. In this wave count, red wave 2 was a "sharp" crash/correction (87 crash) . The most likely pattern of trend for this market in the coming years as an EW guideline would be a sideways market(Law of Alternation). Not too disimilar to the DJIA in the 1970's after it had finsished a very powerfull 3rd wave from the depression lows till 1966. That bear (sideways) market lasted from 1966-1976.
I think it would be fair to say that if we had a similar scenario for the XAO, we shoud expect a choppy sideways affair lasting approx 4 years plus or minus 6 months. As per the 4 year cycle in the chart.( the average 4 year cycle fluctiations in that chart range from 3.5 to 4.5 years).

I think it's also important to note that when the 4 year cycle bottoms, it does not necessarily mean the bottom of the bear market. The lowest point could actually come in during this current leg down, but the subsequent sideways trend (if that's what we get) should end in approx 3 years time and most likely coincide with the bottom of the 4 year cycle.

I am looking for this current leg down to finish by November.

Cheers

 

[Sean K]

Re: XAO Analysis

Need to change the DJIA to the YOYO index.

250 down, and now it's up.



edit: and now 60 down.

LOL

 

[CamKawa]

Re: XAO Analysis

In the last post I mentioned that November might see a termination to this current leg down, but after a closer look it maybe earlier than that. Possibly as early as late July/early Aug, but current wave count does not look completed at this stage

Cheers

The market is looking a bit oversold at the moment and may start to rally this week, but putting wave counts to one side, I really can't see any rally getting too far off the ground until US house prices start to form a base and I’ll be surprised if that happens in next a 4-6 weeks. I’d go back to your bottom forming in November theory.

 

[Nick Radge]

Re: XAO Analysis

I think a significant question that needs to be asked, is why, when Australia has great exposure to commodities and China, are we one of the worst performing markets globally. The reason is that we have the 4th largest current account deficit in the developed world. That's not going away anytime soon nor is wage inflation. As such the RBA will continue to tighten rates placing more pressure on households outside of petrol and food costs.

 

[wavepicker]

Re: XAO Analysis

The market is looking a bit oversold at the moment and may start to rally this week, but putting wave counts to one side, I really can't see any rally getting too far off the ground until US house prices start to form a base and I’ll be surprised if that happens in next a 4-6 weeks. I’d go back to your bottom forming in November theory.

It could do OR a wash out dive soon, perhaps intraday - with huge volume and rotation of positions - If this washout were to happen, it would suggest a more lasting bottom. Even so there will be retests and bottom building for quite a while

Cheers

 

[dhukka]

Re: XAO Analysis

I think a significant question that needs to be asked, is why, when Australia has great exposure to commodities and China, are we one of the worst performing markets globally. The reason is that we have the 4th largest current account deficit in the developed world. That's not going away anytime soon nor is wage inflation. As such the RBA will continue to tighten rates placing more pressure on households outside of petrol and food costs.

Nick,

Wage inflation in Australia has been tame so far. The Aussie economy is slowing clear signs of slowing, e.g in terms of credit growth. PSI, PMI. No doubt this month's 2nd quarter inflation figure wil be nasty but it's difficult to envision more than 1 more rate rise from the RBA. The SFE futures implied yield curve has almost flattened. The NAB has penciled in a 6% cash rate for the end of 2009. How can the RBA contine to raise rates without the risk of throwing the economy into recession? Or are they that firghtened by inflation they don't care?

How about this for an overly simplistic view of why we have one of the worst performing stockmarkets. The strong AUD. The XAO has done worse than the FTSE100 and the S&P500 in percentage terms from peak to trough. However measured in AUD the XAO has outperformed the FTSE and is only 2% worse than the S&P500.

 

[theasxgorilla]

Re: XAO Analysis

Wage inflation in Australia has been tame so far.

Are you for real? When I hear the numbers my friends and ex-colleagues are getting back in Aust I realise I'm better off going back there than I am to London. They didn't all magically become 50% more skilled either.

 

[theasxgorilla]

Re: XAO Analysis

I think a significant question that needs to be asked, is why, when Australia has great exposure to commodities and China, are we one of the worst performing markets globally. The reason is that we have the 4th largest current account deficit in the developed world. That's not going away anytime soon nor is wage inflation. As such the RBA will continue to tighten rates placing more pressure on households outside of petrol and food costs.

Yeah, I must admit, I've seen rabbits pulled from empty hats, but I can't see such a magical bright future for the Aust economy/markets just now. Even if things do kick into gear again I expect that internally people are going to struggle...the number of millionaires will still increase, but the higher wages and cap gains will be eaten by higher mortgage and non-discretionary spending costs...externally the high AUD and high relative wages will mean that Aussies could stand to be become the next Irish or Norwegians going on O/S holidays or buying up O/S property for cents in the dollar...but we'll become known as an expensive place to live/holiday.

 

[theasxgorilla]

Re: XAO Analysis

b] Put the majority of their portfolio into stocks with high dividends and live off the dividends?

Nick has some criteria for determining what constitutes a good stock and a good time to buy such a stock for this kind of strategy. With where the market is today I expect that a few of these might now be hanging low enough to pick.

This is his IP btw, so we're can't reasonably expect him to disclose it here, but it's some food thought anyhow.

 

[davo8]

Re: XAO Analysis

I think a significant question that needs to be asked, is why, when Australia has great exposure to commodities and China, are we one of the worst performing markets globally. The reason is that we have the 4th largest current account deficit in the developed world. That's not going away anytime soon nor is wage inflation. As such the RBA will continue to tighten rates placing more pressure on households outside of petrol and food costs.

Not really. There is no linkage between the CAD and the market.

The reason is that the ASX has a disproportionately large finance sector, it was the finance sector that was responsible for the excess gains we all enjoyed over the last 3 years or so, and it was the finance sector that crashed. Just check the XFJ & XPJ to see what I mean.

We have built a thriving economy and rich lifestyle on debt, and when the debt unwinds we all get to pay for it. The CAD is a symptom, but the net foreign debt is what will trigger a crash sooner or later.

 

[Muschu]

Re: XAO Analysis

Nick has some criteria for determining what constitutes a good stock and a good time to buy such a stock for this kind of strategy. With where the market is today I expect that a few of these might now be hanging low enough to pick.

This is his IP btw, so we're can't reasonably expect him to disclose it here, but it's some food thought anyhow.

Thanks ASX - and I totally respect Nick's position. Timing is an issue I am attempting to address.

I really appreciate your response.

Best wishes

Rick

 

[Wysiwyg]

Re: XAO Analysis

Are you for real? When I hear the numbers my friends and ex-colleagues are getting back in Aust I realise I'm better off going back there than I am to London. They didn't all magically become 50% more skilled either.

I`ll second that.Since 2003 I have worked for up to 150% more per hour than I was back then.I felt guilty at the beginning because I didn`t think the rates were in line with the normal work skills required.

 

[theasxgorilla]

Re: XAO Analysis

We have built a thriving economy and rich lifestyle on debt, and when the debt unwinds we all get to pay for it. The CAD is a symptom, but the net foreign debt is what will trigger a crash sooner or later.

Debt can also be inflated away. And while it is asset prices can keep going up. No crash, but everyone still becomes progressively worse off.

 

[kotim]

Re: XAO Analysis

It appears clear to me that the ASX bank stocks are currently in wave 5 declines. As we know the All ords are effectively controlled by the direction of the banks. So if we are in fact in wave 5 on the downside at the moment then we can’t be too far away from bottoms, which will hold at the very least for a number of months whilst we have some sort of ABC up. Elliot wave can be prone to over analysis when the patterns are not clear. However those bank patterns look obvious to me., for whatever its worth.

 

[dhukka]

Re: XAO Analysis

Are you for real? When I hear the numbers my friends and ex-colleagues are getting back in Aust I realise I'm better off going back there than I am to London. They didn't all magically become 50% more skilled either.

Absolutely for real. I'm sure you can find loads of people who have seen their wages increase rapidly but the fact is wage nflation has not gotten out of hand on a country-wide basis. This from the RBA meeting minutes from the June 3rd meeting:

Members took careful note that, despite the sustained strength of the labour market, aggregate wages growth had remained contained, according to the latest data. The wage price index increased by 0.9 per cent in the March quarter, keeping year-ended growth steady at just over 4 per cent.

 

[kotim]

Re: XAO Analysis

Other than individual pockets real wage growth goes backwards. Most people do not take into consideration taxation. When you buy something in the market place your paying the price that is inclusive of tax. However when you get a pay rise most people do not get a wage rise that takes into consideration the tax that is taken away.

Most people will pay somewhere along the 30-40% tax . Lets say one third for the purpose of this and understand that inflation is now running at over 4%. So in other words to actually get 4% wages growth that is equal to inflation one has to get 4% plus the tax that they would pay, so we are saying that to end up with 4% you need to get 6%.

Now how many people are going to get a pay rise of 6% for the last year gone by and the coming years/s whilst inflation is around 4%.

 

[davo8]

Re: XAO Analysis

It appears clear to me that the ASX bank stocks are currently in wave 5 declines. As we know the All ords are effectively controlled by the direction of the banks. So if we are in fact in wave 5 on the downside at the moment then we can’t be too far away from bottoms, which will hold at the very least for a number of months whilst we have some sort of ABC up.

I don't believe in EW, but on fundamental grounds I agree, the bottom for banks could be near. That depends on how bad the current downturn in housing gets. If it's similar to UK/Europe, we're in serious trouble too.

If you think the ASX is dominated by banks, it's fair to say you've only studied the past 15 years or so. Banks are historically boring and low growth, and I am convinced they will be so again. Those waiting for banks will be standing on the platform after the train has left.

 

[theasxgorilla]

Re: XAO Analysis

Absolutely for real. I'm sure you can find loads of people who have seen their wages increase rapidly but the fact is wage nflation has not gotten out of hand on a country-wide basis. This from the RBA meeting minutes from the June 3rd meeting:

Then unfortunately we have the circumstance of the rich getting richer and in relative terms the poor getting poorer. Howard's policies were always going to lead to this and Rudd won't stay elected by straying to far from it either.

 

[korrupt_1]

Re: XAO Analysis

2 days of very strong reversal candles.... can't help but feel that the bottom of this leg down was formed...

next question is... *if* this (was) the bottom... how high will the next leg up go?


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