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XAO Technical Analysis

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Re: XAO Analysis

Looking for the final leg up after the China GDP figures, then we should have a bit of downside.
Many breaks on the majors fwiw.
 
Re: XAO Analysis

Tuesday, July 14, 2009
Econophysicist Predicts Date of Chinese Stock Market Collapse
The Shanghai Composite Index will burst between July 17 and 27, according to a new econophysics forecast.

The boom and bust nature of economics is one of the most puzzling aspects of the modern world. In the last year or so, many people have learned to their cost that when bubbles burst, businesses, jobs, and livelihoods can go with them.

So an obvious question arises: can we spot bubbles when they occur and predict when they are about to burst? One group of theorists say that they can and have used their techniques to make an extraordinary prediction.

First, they say that they've found the telltale signs of a bubble in the growth rate of the Shanghai Composite stock-market index. And second, they say that this bubble will burst between July 17 and 27.

That's a brave move, so let's look at it in more detail. The theorist behind this prediction is Didier Sornette at the Swiss Federal Institute of Technology, in Zurich, who has pioneered the study of market bubbles. Last year, he used his method for spotting bubbles to reveal that oil prices where dangerously inflated.

The telltale sign of a bubble, he says, is a faster than exponential growth rate caused by a positive feedback mechanism that generates this nonlinear growth.

The faster than exponential growth rate is relatively easy to spot. According to the analysis done by Sornette and a few mates, the Shanghai Composite Index certainly seems to have had a faster than exponential growth--a 69 percent rise since October of last year.

Whether an unsustainable positive feedback mechanism is causing this growth isn't so clear. Sornette and co suggest that what is responsible is the Chinese government's massive lending spree designed to maintain its economic growth rate at 8 percent a year. China has maintained that kind of growth for some years now.

Let's take at face value the idea that a bubble has formed. What of the prediction that it is about to burst? Just how this team arrives at such a precise date isn't clear, but whatever the mechanism, this is a much more speculative move.

One thing that physicists have learned about complex systems, such as stock markets, earthquakes, and forest fires, to name just a few, is that when changes occur they are scale invariant.

That means that if you were to remove the numbers from the axes of a graph plotting this behavior, there is no way that you could identify the scale of the events by looking at the plot. This implies that there is really no difference in principle between a small change in the stock market today and catastrophic change tomorrow.

That makes predictions of almost anything, let alone the imminent collapse of a bubble, extremely hard to make. Impossible may not be too strong a word for it.

Sornette and co do not say how they make their prediction, but they do hedge it by saying, "This will lead to a change in regime which may be a crash or a more gentle bubble deflation."

But they're still predicting an end to this faster than exponential growth in the Shanghai Composite Index between July 17 and 27. That change in growth will of course happen one day, but you'd have to have very good reasons to say that it will occur between those two dates. Those reasons are missing from this paper.

I say that this is a prediction that is impossible to make. And I'm prepared to bet Sornette that he's wrong. The stakes? Let's say an arXiv blog baseball cap and T-shirt.

Ref: arxiv.org/abs/0907.1827: The Chinese Equity Bubble: Ready to Burst
 
Re: XAO Analysis

hmmm from the last threads i c some traders bullish atm...hmm i personally see the next few weeks a correction in the market..with up and coming reports coming in...but in august i say the bulls will come out again,lets wait and see
 
Re: XAO Analysis

makingmoney said:
hmmm from the last threads i c some traders bullish atm...hmm i personally see the next few weeks a correction in the market..with up and coming reports coming in...but in august i say the bulls will come out again,lets wait and see
Click to expand...

Remember, contrarian plays don't work when some traders are bullish (or bearish), it's when the vast majority are.
 
Re: XAO Analysis

Financial Index

I said a number of months ago that any continuation upwards would
be based on the Financial Index in the 3rd Quarter.

We have a breakout of the 2008 lows, a move down into the 2009 lows,
and price action should now be swinging back towards the Yearly
50% levels @ 4400+

After last weeks push down I thought it wasn't going to play out...

But it now looks like a fake push down and prices now rising above the 3rd quarter 50% levels, which can lead to 'thrust' patterns upwards.

Reporting season in August, I just don't see any weakness simply
becasue the current price action doesn't favour heading down.

If markets were going down, they wouldn't 'spring' back above in the
3rd Quarter like they have.

The Financial Index begins to consolidate above 3700 over the next
5-days, it's a good bet it will go higher.
 

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Re: XAO Analysis

so no one entered anything short today i take it ?

i cant im fishing ........... and will be for a few more days yet

just intrested to know how the minions are thinking
 
Re: XAO Analysis

nomore4s said:
A lot of T/A is based around the psychology of the market participants and the similarities between these patterns (so far) shows that the 'panic' of a bubble bursting after the 'euphoria' of an over inflated bubble would appear to be much the same today as it was back then. While it remains to be seen whether this 'recovery' continues to play out as it did back in 1987, it is worth taking note of because it could provide opportunities for us traders/investors.
Click to expand...

Your explanation above concurs with the reason for my endeavours in 87. With the time frames and rebounds being so similar I agree that it appears to be based purely (as you put it) “around the psychology of the market participants.” Either that or manipulation at its best, LOL. Coincidence?

That second chart of yours should have been over the same time frame. You obviously had been looking at the same data, for the same reasons as I, but confusion occurred here when your blue line with that time frame was plotted miles out. But now get your drift.....

Will correct, those 32% rebounds in my last post, should have read 26% rebounds, was writing off memory. That 32% rebound is the average rebound a year after a stock market crash, off memory. LOL

Looking for 15. Then back to the Yen, short just still seems un-productive.

nunthewiser said:
so no one entered anything short today i take it ?

i cant im fishing ........... and will be for a few more days yet

just intrested to know how the minions are thinking
Click to expand...

what ya fishin?
 
Re: XAO Analysis

MR. said:
confusion occurred here when your blue line with that time frame was plotted miles out. But now get your drift.....
Click to expand...

lol, sorry the blue lines aren't to scale as I had limited space on the chart to draw them.:)
 
Re: XAO Analysis

nomore4s said:
lol, sorry the blue lines aren't to scale as I had limited space on the chart to draw them.:)
Click to expand...
well well.....

Glen48 said:
But they're still predicting an end to this faster than exponential growth in the Shanghai Composite Index between July 17 and 27. That change in growth will of course happen one day, but you'd have to have very good reasons to say that it will occur between those two dates. Those reasons are missing from this paper.
Click to expand...

skyQuake said:
Looking for the final leg up after the China GDP figures
Click to expand...

????

Shanghai Index
http://finance.yahoo.com/q/bc?s=000001.SS&t=5y&l=on&z=m&q=l&c=

Does appear a little too high!
 
Re: XAO Analysis

jancha said:
i think one cannot exclude the possibility of 2500 ?

In order for the market to drop that level there would have to be something alot more serious than whats already unfolded. What would the condition of the average super fund or alot of other assets be in if that were the case? You would be talking of a depression not a recession. I'm not a chartist or an economist but i think your 2500 is way off the money.
Click to expand...

Didn't say it was going to happen, but as I said, I would not count it out just yet. Nothing great has happened since March. Panic could shake the boat. In terms of companies outperforming, it is very difficult for them to underperform this quarter. The bar is way too low. I think Goldman will be interesting to watch. If they can break above 155, financials could have a rally. That is a heck of a resistance line at that level. Unemployment still is a bad sign. That will most likely push house prices down. In any case, my :2twocents
 
Re: XAO Analysis

P.S. I am surprised that the bears broke the 880 level on the S&P. i thought there would be a lot of money at that level to keep the boat afloat. A great trick to take us through the summer months (in the northern hemisphere).
 
Re: XAO Analysis

Glen48 said:
Tuesday, July 14, 2009
Econophysicist Predicts Date of Chinese Stock Market Collapse
The Shanghai Composite Index will burst between July 17 and 27, according to a new econophysics forecast.

The boom and bust nature of economics is one of the most puzzling aspects of the modern world. In the last year or so, many people have learned to their cost that when bubbles burst, businesses, jobs, and livelihoods can go with them.

So an obvious question arises: can we spot bubbles when they occur and predict when they are about to burst? One group of theorists say that they can and have used their techniques to make an extraordinary prediction.

First, they say that they've found the telltale signs of a bubble in the growth rate of the Shanghai Composite stock-market index. And second, they say that this bubble will burst between July 17 and 27.

That's a brave move, so let's look at it in more detail. The theorist behind this prediction is Didier Sornette at the Swiss Federal Institute of Technology, in Zurich, who has pioneered the study of market bubbles. Last year, he used his method for spotting bubbles to reveal that oil prices where dangerously inflated.

The telltale sign of a bubble, he says, is a faster than exponential growth rate caused by a positive feedback mechanism that generates this nonlinear growth.

The faster than exponential growth rate is relatively easy to spot. According to the analysis done by Sornette and a few mates, the Shanghai Composite Index certainly seems to have had a faster than exponential growth--a 69 percent rise since October of last year.

Whether an unsustainable positive feedback mechanism is causing this growth isn't so clear. Sornette and co suggest that what is responsible is the Chinese government's massive lending spree designed to maintain its economic growth rate at 8 percent a year. China has maintained that kind of growth for some years now.

Let's take at face value the idea that a bubble has formed. What of the prediction that it is about to burst? Just how this team arrives at such a precise date isn't clear, but whatever the mechanism, this is a much more speculative move.

One thing that physicists have learned about complex systems, such as stock markets, earthquakes, and forest fires, to name just a few, is that when changes occur they are scale invariant.

That means that if you were to remove the numbers from the axes of a graph plotting this behavior, there is no way that you could identify the scale of the events by looking at the plot. This implies that there is really no difference in principle between a small change in the stock market today and catastrophic change tomorrow.

That makes predictions of almost anything, let alone the imminent collapse of a bubble, extremely hard to make. Impossible may not be too strong a word for it.

Sornette and co do not say how they make their prediction, but they do hedge it by saying, "This will lead to a change in regime which may be a crash or a more gentle bubble deflation."

But they're still predicting an end to this faster than exponential growth in the Shanghai Composite Index between July 17 and 27. That change in growth will of course happen one day, but you'd have to have very good reasons to say that it will occur between those two dates. Those reasons are missing from this paper.

I say that this is a prediction that is impossible to make. And I'm prepared to bet Sornette that he's wrong. The stakes? Let's say an arXiv blog baseball cap and T-shirt.

Ref: arxiv.org/abs/0907.1827: The Chinese Equity Bubble: Ready to Burst
Click to expand...

At a critical point
Bubbles end
They can bust or deflate

Sornette defines a Bubble

as a growth rates above exponential
ie on a log chart the line will curve ( up or down-anti bubble )
Of course this is unsustainable..

Caused by a Synchrony emerging between market participants

In this PAPER he uses clapping at a concert as the analogy

Synchrony can only break down

Another good example is people on a boat
all running to the one side to look at something or avoid something

The "random" oscillations take on a certain characteristic
In Sornettes terms ---> log periodic

Again this is back to differences of opinion
revealed by fluctuations

It depends on how much air is in the bubble
and outside triggers ( eg money tightening )
whether the bubble is just a temp overbought state
which leads to correction and consolidation
or a full break like in 1987

I think there is more to consider
eg where the action as come from
If it is from an oversold state
or already on top of a extended move

He identifies the "fluctuation" and projects from the critical point
Where The "Synchrony" collapses into itself..

motorway

https://www.aussiestockforums.com/forums/showpost.php?p=317394&postcount=9

London Bridge Is Swaying ‘Round
On June 10, 2000, the Millennium Bridge opened to the public with great fanfare.

London’s first bridge across the Thames in over a century, it had a sleek design””the architect wanted it to look
like a “blade of light.” 9 However, when thousands of people stepped on the bridge that day, it
started to sway from side to side so much that people had to stop or hold on to the rails.

Fearing
for the public’s safety, officials closed the bridge two days later and, following a retrofitting, it
reopened in February 2002.


What led to this high-profile failure? People exert a small amount of lateral excitation when they
walk. Normally, these excitations cancel out when a group crosses a bridge. However, the
Millennium Bridge initially had insufficient lateral dampeners, which allowed a little swaying when
a sufficient number of people were on the bridge.

That swaying forced people to change their gait
by widening their steps, leading to greater lateral excitation and more swaying. The wobbling and
crowd synchrony emerged simultaneously.

The crucial insight is the existence of a critical point. Simulations show that roughly 165 people
can walk on the bridge with little impact on the wobble amplitude.

But adding just a
few more pedestrians causes the amplitude to change dramatically, especially as the feedback
between gait adjustment and wobble amplitude kicks in . For the
first 165 bridge crossers, there’s little wobble and no sense of any potential hazard even though
the bridge is on the cusp of a state change.

London Bridge Is Swaying ‘Round
On June 10, 2000, the Millennium Bridge opened to the public with great fanfare.

London’s first bridge across the Thames in over a century, it had a sleek design””the architect wanted it to look
like a “blade of light.” 9 However, when thousands of people stepped on the bridge that day, it
started to sway from side to side so much that people had to stop or hold on to the rails.

Fearing
for the public’s safety, officials closed the bridge two days later and, following a retrofitting, it
reopened in February 2002.


What led to this high-profile failure? People exert a small amount of lateral excitation when they
walk. Normally, these excitations cancel out when a group crosses a bridge. However, the
Millennium Bridge initially had insufficient lateral dampeners, which allowed a little swaying when
a sufficient number of people were on the bridge.

That swaying forced people to change their gait
by widening their steps, leading to greater lateral excitation and more swaying. The wobbling and
crowd synchrony emerged simultaneously.

The crucial insight is the existence of a critical point. Simulations show that roughly 165 people
can walk on the bridge with little impact on the wobble amplitude.

But adding just a
few more pedestrians causes the amplitude to change dramatically, especially as the feedback
between gait adjustment and wobble amplitude kicks in . For the
first 165 bridge crossers, there’s little wobble and no sense of any potential hazard even though
the bridge is on the cusp of a state change.
Click to expand...
 
Re: XAO Analysis

so i take it im the only goose in these forums that entered anything short today ?

geez next time im gunna throw the bishop overboard instead of listening to his drunken fool ramblings
 
Re: XAO Analysis

nunthewiser said:
so i take it im the only goose in these forums that entered anything short today ?

geez next time im gunna throw the bishop overboard instead of listening to his drunken fool ramblings
Click to expand...

You're not the only goose nun! Lets see what tomorrow will bring
 
Re: XAO Analysis

Does closing out profitable longs today make me a goose as well??

brty
 
Re: XAO Analysis

brty said:
Does closing out profitable longs today make me a goose as well??

brty
Click to expand...

Only if
a) you didn't close them at the highs in the open
b) and it rallies tomorrow :)

You know being a goose is tough work, we can't just let anyone be goose.
 
Re: XAO Analysis

My vote for the next few trading days is sideways to downwards chop.

After that? Not sure yet.

Be happy to take shorts a little higher, say 935s for now.

Be happy to cover around the 900s.
 
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