Re: XAO Analysis
Hmmm I made a prediction in Oct last year that the XAO would be at 4100 april 1st. based on a variation of the chart I'm about to post. Unfortunately I was wrong, but at the time 4100 seemed quite a long way down
I posted this over a T$ but It might be a better place here
be warned my charting is notoriously inaccurate, and my interpretations perhaps a little unorthodox, so laugh if you must, but I reckon we saw the bottom... of course anything is possible with the worlds economic meltdown, so take this post with a bucket of salt!
If you look far enough back in this thread you will probably see previous incarnations of this chart, I suspect some of the posts saying that we were going to see an 87 style crash.
below from my post at T$
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Well I decided to fire up Incredible charts again, and have another look at the XAO. I've gone back to my original trend channel, with a slight adjustment for the latest plummet and turnaround, and it to me is looking quite interesting.
I haven't really used the commodity channel indicator before, but in this application it seems to be quite telling, certainly it would seem that when approaching the -200 mark it is a pretty safe bet that the current bottom has been reached (this on the monthly chart, I haven't looked at weekly or daily). This has been the case for almost all of the worst bottomings in the last 30 years.
The other thing I found interesting was the RSI. I had been using it to try and predict the top of the market (before I lost interest and foolishly stopped, otherwise I may be a lot better off now than I am)... It's normal oversold level (on the monthly) seems to be around 40, though in this case it has gone down to almost 20. I really do think we have seen the falling off a cliff stage, and whilst a recovery will probably be long and painful I think we have probably now seen the real bottom... however if you take that bottom trend line as the absolute, then there is potential for the market to stay low for a long time! it could quite easily bounce along off that bottom trendline, and could take many years to go anywhere near the top one!
I've also drawn a couple of parallel lines on the chart, one at 1750 and another at about 3300 (which is the point where the bottom trend channel was touched. we have now recovered to around 3500. What is significant about this? Well from the run up in 1987 before the crash, the XAO hit 1750 in may, 22 years later we are now sitting at just double that at 3500. That is a 100% gain in the market over a period of 22 years. The market has fallen around 50% which means a 100% gain is necessary to get back to where it was before the crash. This crash, to me looks (on the chart) to have been more severe than 1987. Anyway its not all doom and gloom, at least it looks like things are turning around, but it might be a while before the next bubble comes along. I suspect that it is largely a generational thing!
Of course this is all tea leaf reading voodoo, but it looks good on paper
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Tony.
edit: I thought it interesting to revisit this post
https://www.aussiestockforums.com/forums/showpost.php?p=143115&postcount=359 The worst bit is, I stopped watching the market around Sep (getting ready for birth of my daughter) and got caught holding all of my stocks