XAO Technical Analysis

[Beej]

Re: XAO Analysis

Its a fibonnaci fan. I don't normally draw it on a semilog, so cannot vouch for its significance.

Fibonacci Fan Lines are displayed by first drawing a trendline between two extreme points. MetaStock then draws an invisible vertical line through the second extreme point. This vertical line is then divided at the Fibonacci levels of 38.2%, 50.0%, and 61.8%. Finally, three trendlines are drawn from the first extreme point so they pass through the invisible vertical line at the above three levels. (This technique is similar to the method used to calculate Speed Resistance Lines

gg

I would suggest doing that analysis on a LONG term chart without log y axis is just meaningless.

Cheers,

Beej

 

[wayneL]

Re: XAO Analysis

I would suggest doing that analysis on a LONG term chart without log y axis is just meaningless.

Cheers,

Beej

That might be so Beej,

But an assertion of meaninglessness without meaningful evidence is, ummm... meaningless.

Let us know why you think that.

 

[Garpal Gumnut]

Re: XAO Analysis

I would suggest doing that analysis on a LONG term chart without log y axis is just meaningless.

Cheers,

Beej

You may well be correct, do you have any evidence though or is it just a hunch. I'm unsure whether Fibonacci used a semi log with his rabbits or not. I'm not saying your incorrect.


gg

 

[tcoates]

Re: XAO Analysis

Possible head and shoulders pattern (see red line sloping down) using weekly chart. Needs to break down through the red line to confirm. The Fib. lines is only used to determine target - though target is from high (mid Oct '07) to intersection with red line...



Tim

 

[Sean K]

Re: XAO Analysis

Possible head and shoulders pattern (see red line sloping down) using weekly chart. Needs to break down through the red line to confirm. The Fib. lines is only used to determine target - though target is from high (mid Oct '07) to intersection with red line...

Tim

Yeah, this was thrown up some time ago. (maybe even by me - damn I'm good, lol ), but leaves a pretty desperate target doesn't it. It's end of the universe stuff almost.

 

[tcoates]

Re: XAO Analysis

Kennas,

The most recent Smart Investor has David Hunt (President of ATAA) has targets of 4164 and "ultimate target" of 3440 (sometime next year). Ming you, he is referring to the XJO. But there is not much diff between the XJO and XAO chart wise.



and the crash in '87 took off a good chunk off the index. Declines between '87 and today, have taken between 50% and 61% off the prev up move?!?

As for the prev. post re "head and shoulders" ... my mind does not go back that far (doh). Also if the index goes below (say) 4500 that would validate the head and shoulder pattern.

Tim

 

[korrupt_1]

Re: XAO Analysis

crikey!!... you bears are not painting a very good picture for us bulls

i'm wondering,.. if the XAO does get to as low as 3000's... what would the value of our blue chips be at then?

I'd snap up a zillion BHP shares if it gets to $20's

 

[Sean K]

Re: XAO Analysis

I'd snap up a zillion BHP shares if it gets to $20's

What's a zillion @ $20 ?

I might be able to afford a 100@$20 by then...

Nice long term plan though, I like it!

 

[Whiskers]

Re: XAO Analysis

Possible head and shoulders pattern (see red line sloping down) using weekly chart. Needs to break down through the red line to confirm. The Fib. lines is only used to determine target - though target is from high (mid Oct '07) to intersection with red line...



Tim

H & S is more unreliable the steeper the slope isn't it... especially when sloping with the trend?

I'm thinking trend lines and formations are getting a bit arbitrary now, since there's some very substantial changes occurring in the dynamics of the economy and regulatory enviornment... ie probably the biggest over-haul in decades (mainly in the US, but which filters through to us) which I think many people have not fully comprehended, let alone factored into the medium term.

But having said that, I guess it'll only be a matter of time until the genie-asses find another way to wrought the system.

 

[Beej]

Re: XAO Analysis

That might be so Beej,

But an assertion of meaninglessness without meaningful evidence is, ummm... meaningless.

Let us know why you think that.

I already provided reasoning when making the same point weeks ago in another XAO analysis thread. So here goes again - you are plotting linear projection lines. If you don't use a log y/price axis, then as you move further along the x-axis (time), the "linear" rate of price change in any projection is reflecting in effect an ever-decreasing (exponentially) rate of return (either positive or negative). The log chart let's you use a linear projection (straight line) to reflect a constant rate of return (in % terms) either way.

For a short term chart (say < 1 year) this may not matter much as the difference is minimal. When you are charting over 20-30 years it matters a lot. Just think about the cumulative inflation since 1981 for example to get the idea.....

Cheers,

Beej

 

[tcoates]

Re: XAO Analysis

From

http://www.trending123.com/patterns/head_and_shoulders.html

"The neckline can slope up or down. An upward sloping neckline is considered to be more bullish than a downward sloping one, which indicates a weaker situation with more drastic price declines. It is rather rare to have a downward sloping neckline for this pattern."

That said...

"The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable."

From my perspective volume has not really been decreasing.

Tim

 

[brty]

Re: XAO Analysis

Hi,

Just to put the possible falls into perspective, I have shown below the % declines from the peak prices for the XAO going back to the turn of the century (1900).

These figures are based on those posted by Prof fink, and are XAO recalculated backwards, since it only came into existence in 1980. The actual source is unknown, but it does seem reasonably accurate when I compare to some older books I have.

It is also only on a monthly close basis, not the absolute highs and lows.

Biggest falls high to low.

1914-1916 26%
1929-1931 46%
1937-1942 32%
1951-1953 33%
1970-1974 55%
1980-1982 37%
1987-1988 43%
1989-1990 27%
2007-2??? 25% so far, taking the july monthly close of 5050.

What does it all mean?? Hell I've got no idea, except that a much larger fall is possible without being out of the ordinary.

We have falls of this magnitude or larger on average every 12 years. It's been 17 years since we had a fall this big.

The last time there were 17 years between large falls '53-70, the market fell 55% over 4 years, and that was after a mining boom!!!

Given the state of credit markets and the reverberations still to be felt, somewhere in the 3000's seems likely, but may not occur for a year or two.

brty

 

[dhukka]

Re: XAO Analysis

It is also only on a monthly close basis, not the absolute highs and lows.

Biggest falls high to low.

1914-1916 26%
1929-1931 46%
1937-1942 32%
1951-1953 33%
1970-1974 55%
1980-1982 37%
1987-1988 43%
1989-1990 27%
2007-2??? 25% so far, taking the july monthly close of 5050.

What does it all mean?? Hell I've got no idea, except that a much larger fall is possible without being out of the ordinary.

We have falls of this magnitude or larger on average every 12 years. It's been 17 years since we had a fall this big.

The last time there were 17 years between large falls '53-70, the market fell 55% over 4 years, and that was after a mining boom!!!

That's the problem with using month end totals, you miss some significant peaks and troughs. It was only 6 years ago that we had a +20% correction. From Feb 14th 2002 - Mar 13th 2003 the market fell -22%.

btw weren't you one of the biggest cheerleaders a few months back?

Hi,

I love this thread, all the doom and gloom.

We have had a 'imminent and severe market correction' of 20%+ in many large stocks as well as the indices.

We are getting more and more bad news, yet the market may have already factored this in. The news coming out is not sinking the market anymore (not to the effect it was)

When I step into the real world, people are still shopping, they are buying houses, they are buying cars, they are investing, they are putting money into super. Basically the world as we know it is continuing.

The powers that be will do everything possible to avoid the type of meltdown many posters here think is imminent.
The probabilities lie in the market going higher in both the median and long term.

Go ahead and knock yourselves out being short the world, after all, someone has to take the otherside of the bet.

bye

brty

XAO at the time 5663.7

 

[korrupt_1]

Re: XAO Analysis

With the introduction of online trading, and better public knowledge of the stock markets,... do you think that there are more 'Mum and Dad' style of investors out there that will add liquidity to the markets? I mean, the only reason why it goes up is because there's a flow of money INTO the system... With more savvy traders utilising online brokers, this just makes it easier for people to access it right?

Therefore, is it possible that the extreme lows of 3000's might be avoided because there's so much more relative liquidity now than it was in the early 1900's to 1980's???

Im not sure about you guys, but 3000's seems really extreme (I'm sure others have mention this before)... I do believe that mid 4000's might be possible, but can't really believe - and justify - that it can go much lower...

 

[brty]

Re: XAO Analysis

Hi Dhukka,

There are many other corrections that come in at 15-20% just like that one did. The problem is that I only have the monthly close data going back as far as 1900, not the intra monthly highs and lows.

I think it is best to compare like with like, hence why that particular correction did not show up higher and why I used the July close of 5050, not the low.

That post of mine you decided to highlight, I still stand by. The market will not go straight down on all probability, it rarely does.

In fact most of those large declines had retracements of 60-80% towards the top before making the ultimate low, from an intermediate low, the exception being the '87 crash (very fast from top to bottom) and the '29 crash where the retracement was ~20%.

Basically money can still be made going long on carefully selected stocks, with stop losses, as I suggested around the middle of march. In another thread I suggested time to cash in profits, in the middle of May, but you didn't highlight those posts.

Also the index is an index, not individual stocks. You would not be able to find one stock that has gone even close to mimicking the performance of the index over the last 108 years, which by the way is 6.4% pa, to last years high, not the often touted 9%+.

I am also not married to a position, circumstances change, my opinion will change according to what is happening in the markets.

Happy trading

brty

 

[dhukka]

Re: XAO Analysis

Hi Dhukka,

There are many other corrections that come in at 15-20% just like that one did.

That one didn't come in between 15 - 20%, it was 22%.

The problem is that I only have the monthly close data going back as far as 1900, not the intra monthly highs and lows.

Yes that is the problem and therefore the reason your analysis is just not very useful.

That post of mine you decided to highlight, I still stand by. The market will not go straight down on all probability, it rarely does.

That's nice that you stand by your post, but your post did not say anything about the market not going down in a straight line, it said:

The probabilities lie in the market going higher in both the median and long term.

The market going higher in the long term is a platitude, what do you define as the medium term? 6, 12 months?

I must have missed your May call. You came on the imminent & severe market correction thread back in March to tell everyone we would get a tradeable rally, yet another platitude. You don't get any browny points for pointing out the obvious.

 

[skyQuake]

Re: XAO Analysis

Aussie super funds have not been selling. A few have mandates that prevent from from doing so, other have 50year horizons. So thats one good thing... till ppl start doing some redemptions.
Long term investors have been eating divvies and income streams for many years without fear of loss.
They never had to worry about capital loss before... I would think with the recent turmoil some are getting quite worried (esp BNB holders lol). Why hold 'dangerous' banks when they can ear a nice 8% on a term deposit with no risk? This imo will eventually spark some sort of proper panic selloff.

 

[Beej]

Re: XAO Analysis

Aussie super funds have not been selling. A few have mandates that prevent from from doing so, other have 50year horizons. So thats one good thing... till ppl start doing some redemptions.
Long term investors have been eating divvies and income streams for many years without fear of loss.
They never had to worry about capital loss before... I would think with the recent turmoil some are getting quite worried (esp BNB holders lol). Why hold 'dangerous' banks when they can ear a nice 8% on a term deposit with no risk? This imo will eventually spark some sort of proper panic selloff.

Yes those are interesting and valid points. Remember though that 8% cash returns have only recently been available, with the last time cash was king being back in the early 90s. Interest rates are coming down - the more the economy slows the faster they might come down. So what might happen if the cash return drops quickly to say 5 or 6% (gross before tax) max, and many blue chip stocks are able to reaffirm their ability to return a gross dividend return (ie including franking credits) in the order of 6-10% (11.5% at current prices for some the banks like ANZ and NAB!)? If this situation was coupled with some improvement in sentiment (ie appetite for risk is OK), then a lot of money could flow back into the market. If however sentiment remains low, then that low interest rate situation might simply spell more sideways action.

Surely, something really bad and currently unexpected would have to happen to spark another really big sell-off? Not saying it won't happen, but what could that be? And will things really get that bad economically - or will this just be a "regular" slow down? I guess this is what is meant by uncertainty.....

Cheers,

Beej

 

[skyQuake]

Re: XAO Analysis

RBA can drop rates all it wants but if the credit crunch worsens, the cost of funding for banks will be prohibitive again... Inflation is still well above the 2-3 band, and once the RBA figures out its not slowing, cuts may stall.

Anything can spark a panic. And the financial press will blame it on something completed unrelated. I can see it now "BABY WHALE OUTRAGE CAUSES FINANCIAL MELTDOWN"

The decline so far has been relatively calm. No jumping out of the windows yet. A few months down and we can see real panic start if US doesnt lead us out of it.

 

[skyhawk]

Re: XAO Analysis

Kennas,

The most recent Smart Investor has David Hunt (President of ATAA) has targets of 4164 and "ultimate target" of 3440 (sometime next year). Ming you, he is referring to the XJO. But there is not much diff between the XJO and XAO chart wise.

David Hunt. Geez
mate I wouldn't trust that guy for anything.
I went to various seminars that he runs through his co ADEST, where he promotes high profile gurus both local and overseas(mainly Gann and Elliott guys). Went to a few of these a few years ago with some other traders. For a seasoned chartist/trader Hunt should focus on his trade rather than trying to make a killing charging mega prices for people to see these guys!!
What's worse the forecasts both Hunt and these gurus were expecting back then never even eventuated..... Makes you wonder how this clown became head of the ATAA