BOTTOM LINE
9/5:
EW Trend: Up
CAUTION!
Price Trend: Up
Trend Strength: Strong
Broker Consensus: n/a
4/5:
EW Trend: Up
Price Trend: Up
Trend Strength: Strong
Broker Consensus: n/a
LAYMANS ANALYSIS
9/5:
VIDEO ANALYSIS (2 mins 43 secs)
It's only been a few days since the last update, but today was no ordinary day. When you see two of the top six capitalised stocks go through the roof and back again, you need to take notice. RIO and BHP were all action on rumour and innuendo. Who really knows? What we do know from a technical perspective is that both exhibited classic traits of blow-off tops. I stated just recently (May 1st) that BHP had the possibility of hitting $32.50. Today's high? $32.58. Today's close? $31.93. Volume wasn't overly high at all, so quite possibly we can look at it's movement as lack of follow through demand. RIO is a slightly different, and more bearish concern. My target was $101.52. Today's high? $99.69. Today's close? $95.50. But, the big difference is volume. RIO had ultra high volume. This combined with a low close suggests supply and in turn suggests we may have seen a serious high. Yes we could go on with it, but it says to me that the market doesn't think so. This is a classic blow-off top in RIO and I suggest anyone who has been long basis my analysis of late March take serious note. The XJO also missed the "squeeze" to 6400 by just a few points. An old market adage, "don't be a dick for a tick" basically means it's not about perfection. We've achieved what we expected and we're now showing signs of reversing - now. We may well see the XJO back to 6100 over the coming few weeks - CAUTION.
4/5:
VIDEO ANALYSIS (1 mins 36 secs)
The pace of these gains is unrelenting. We're seeing something truly special in these markets driven by the resources boom and the influx of funds from SMSF's. At the rate we're going we could see 6700 by end of June. At this stage however we're getting very close to being over-extended but we may still squeeze to 6400 over the next week before completing this stage of the trend. Assuming that will occur, I would then expect, aligned with the US market, a reversal of these current gains back to the 6000 to 6100 area, aligned with the major highs set in February. There is of course always a chance that the anticipated reversal will only show itself as a sideways consolidation pattern without a great deal of underlying weakness. Either way, further gains through to 6700 are still possible. It would take a break back through 5917 so suggest this current pattern has terminated.
TECHNICAL DISCUSSION
9/5:
The XJO has pushed within 18-points of the 6400 target for this wave. It;s highly probable that we've seen a wave-v and therefore the intermediate degree wave-(iii) high. As such we should now expect wave-(iv) to unfold back toward 6100 over the coming weeks. Today was not high volume, but the low close combination suggests lack of demand. Lack of demand means that it may not take a great deal to knock the market back down again. If RIO and/or BHP come out and refute these rumours we could see quite a dramatic reversal of fortune. I stress caution here. The risk is to the downside and 6100 is in my sights, although this is still seen as a corrective move within a larger up trend. It would take a break below 5917 to get bearish though.
4/5:
The impulsive pattern discussed earlier this week has sub-divided into a smaller degree labelled in MAGENTA. The wave-v target for this structure is circa 6400 coinciding with the upper side of the channel. A completion of this degree wave-v will therefore signal the completion of the intermediate degree wave-(iii) and this will be followed by some setbacks as wave-(iv) unfolds. I guess we need to continue to suggest this strength remains firmly in place until June 31. By that stage we could see the 261.8x wave-(i) at 6700.
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Past performance is not a reliable indication of future performance. This material has been prepared based on information believed to be accurate at the time of publication. Subsequent changes in circumstances may occur at any time and may impact the accuracy of the information.