XAO Technical Analysis

Awesomandy · 25 July 2007

Re: XAO Analysis

Definitely a fair drop overnight, but everything are still pretty much within the trend, so I'm not worried at the moment. The current yo-yo movements of late can be unsettling for some, especially after an extended bull period we've had of late, but personally, I'll just wait and see what happens, as the answers will present itself when the index breaks ~6450 or ~6200. Until then, there's probably not too much money to be made chasing the index.

Trembling Hand · 25 July 2007

Re: XAO Analysis

wavepicker said:
As per posts #603 and 662, indices getting smashed as expected.
Correction should carry at least to base of the consolidation range.

Was a classic EW setup for a short, got shaken out on the repeated retest early on but went short again last night as pattern looked too convincing.

There are way too many bulls in market at present!!!. How significant is this correction??. It might be the most significant for the year. Overseas indices such as FTSE and DAX have classic EW termination patterns (Ending Diagonals). But if it ends up being shallow, then I have a very significant cycle termination of 15- 22 August. For the current move down we may get some support(not sure how significant yet) in time coming in the next 2 days however.

Cheers

Just a quick stat on big gaps down on the Aussie market. Since January 05 it has gaped down from the day session more than 1% 25 times. If you take the close from the day it gaped down and looked ahead three days later it has closed higher 22 times. The average gain from the close on the first day to close three days later for the 22 positive times has been 98 points.

wavepicker · 25 July 2007

Re: XAO Analysis

trembling Hand said:
Just a quick stat on big gaps down on the Aussie market. Since January 05 it has gaped down from the day session more than 1% 25 times. If you take the close from the day it gaped down and looked ahead three days later it has closed higher 22 times. The average gain from the close on the first day to close three days later for the 22 positive times has been 98 points.

Good stats TH, those are good odds. One observation made by myself and another Elliotician on this forum, was that the intraday wave structures on the XAO from 2-3 days ago appeared to “corrective” in nature. This might be a clue, in that perhaps this is just a correction and not something much bigger. Just because these wave structures were corrective however does not mean that we won’t have a big correction but does show that the correction will probably be fully retraced when it’s over by an impulsive move.

If this is in fact a correction lasting a few days, then a rally to the next time cycle high in August(this would be a longer time cycle termination) would look more convincing than this one(In particular for the SP500-not sure about XAO)
Long term time cycles are at or nearly at a peak so any further upside should be limited or at best a slowing of upward momentum.

Cheers

Trembling Hand · 25 July 2007

Re: XAO Analysis

wavepicker said:
Good stats TH, those are good odds. One observation made by myself and another Elliotician on this forum, was that the intraday wave structures on the XAO from 2-3 days ago appeared to “corrective” in nature. This might be a clue, in that perhaps this is just a correction and not something much bigger. Just because these wave structures were corrective however does not mean that we won’t have a big correction but does show that the correction will probably be fully retraced when it’s over by an impulsive move.

If this is in fact a correction lasting a few days, then a rally to the next time cycle high in August(this would be a longer time cycle termination) would look more convincing than this one(In particular for the SP500-not sure about XAO)
Long term time cycles are at or nearly at a peak so any further upside should be limited or at best a slowing of upward momentum.

Cheers

This is what I can never figure out with 'Idiot Wave Theory' how do you know what Wave we are in? Maybe that just makes me the Idiot.

wavepicker · 25 July 2007

Re: XAO Analysis

trembling Hand said:
This is what I can never figure out with 'Idiot Wave Theory' how do you know what Wave we are in? Maybe that just makes me the Idiot.

Hello TH,

It doesn’t really matter which wave you are in, it is only of secondary importance, this where most come unstuck. The pattern is what matters especially in this case. Refer post #603 where I posted a chart of the DJI last week..

You can figure out the probable wave count from the structure of the pattern. In this case the count is not important. You had a sideways consolidation (contracting triangle wave 4). These types of patterns ALWAYS precede the final move up in an impulse in this case wave 5(depending on the degree of trend you are looking at). If it was a correction then it would have preceded the wave C. That pattern was the big giveaway. I find EW just as subjective as the next person sometimes, but it does has positives and this is one of them. If it’s too subjective then give it a miss and find a market that is conforming to EW tenets!!

What was good about this wave 5 was that it was accompanied by a time cycle on the 16th July. In this case I don’t know how much of a correction we are gonna get . It could be quite large it could be small, but based on the pattern and probabilities, it might be good for a test toward the base of the consolidation and that is where I would probably be looking. It’s explained in post # 603

Cheers

Trembling Hand · 26 July 2007

Re: XAO Analysis

wavepicker said:
I would be more confident with the August 10-22 zone however but this may or may not happen. This time period should be a high of some type, but whether it is a higher high or lower high I don’t know. Then again it probably doesn’t matter too much does it??? It’s only 3 -4 weeks away!!! So now is a time for caution IMO.

Cheers

Here is my bit for the BEARS.

Woke up screaming in the middle of the night remembering the junction between wavepickers August 22nd peak date and BHPs results announcement on the same day!!!!
Could it be our biggest cap stock blows the doors off, but because of the big run its had we get sell the news and it rolls the whole market over. Could that be our last great day, The day the bulls say I told you so, the bulls go to bed with the sound of victory trumpets still ringing in their ears only to wake up the next day and watch the materials start a down trend.

wavepicker · 26 July 2007

Re: XAO Analysis

trembling Hand said:
Here is my bit for the BEARS.

Woke up screaming in the middle of the night remembering the junction between wavepickers August 22nd peak date and BHPs results announcement on the same day!!!!
Could it be our biggest cap stock blows the doors off, but because of the big run its had we get sell the news and it rolls the whole market over. Could that be our last great day, The day the bulls say I told you so, the bulls go to bed with the sound of victory trumpets still ringing in their ears only to wake up the next day and watch the materials start a down trend.

Hi TH, the August 15-22nd zone is a point in time and that is all. It could be a higher high than the last peak it OR it might be a lower high of some type. Not saying bull is over, just taking it one step at a time ATM. What is interesting is that the SP500 for example has found OBVIOUS resistance at the level of the year 2000 peak. Now best to focus on the pattern of the trend as is the best clue to what the market has in stall. Time cycles are merely a guide and perhaps alerting us to be cautious at this juncture.

Cheers

Trembling Hand · 26 July 2007

Re: XAO Analysis

wavepicker said:
Hi TH, the August 15-22nd zone is a point in time and that is all. It could be a higher high than the last peak it OR it might be a lower high of some type. Not saying bull is over, just taking it one step at a time ATM. What is interesting is that the SP500 for example has found OBVIOUS resistance at the level of the year 2000 peak. Now best to focus on the pattern of the trend as is the best clue to what the market has in stall. Time cycles are merely a guide and perhaps alerting us to be cautious at this juncture.

Cheers

I was being a bit foolish but I am worried about the reporting season starting now. Not that they will be bad but that the good news is baked in already. Especially the miners as they are ones that have held the market up if they crack and something else does not stand up i.e. the financials it could get a bit ugly.

Not really any surprise that the 2000 highs on the SP500 have acted as resistance if they didn't in some way well, T/A would be rubbish!

hacheln_mice · 26 July 2007

Re: XAO Analysis

Hmmm. The morning slide seems to be caused by more hedge fund problems...except this is now an Australian problem too....

I'd like to think the 61.8% retracement of the recent move at 6315 will hold and be a buying opportunity...or we'll be testing 6220 again.

tech/a · 27 July 2007

Re: XAO Analysis

Hmm stage set for some interesting market action.
Going to be expensive for long term porfolio holders like myself.
Still no guarentee's this will freefall.
However O/N volume on the DJIA suggested supply was strong,rather than lack of demand.

Sell off/retrace/stronger sell off common reversal pattern.
6170 becomes the focus on our market.
How this level reacts when and if hit. Will determine future market probabilities.

Current market top is very close to final (similar but varied) wave 5 measurements given by many.
The in ability of the market to take out the 6440 high convincingly seems to at this point indicate that the top is in.(Fooled me!).

Trembling Hand · 27 July 2007

Re: XAO Analysis

tech/a said:
Hmm stage set for some interesting market action.

Yes I'm long that idea!

Today the consolidate, run again game is dead, not the bull market. We will need a new playbook until the highs are taken out convincingly and I can't see anyone thinking that will happen for some time. We have not had a down side break to a meaningful consolidation in 4 years. This will be the start of a new game for many!

Sean K · 27 July 2007

Re: XAO Analysis

trembling Hand said:
Yes I'm long that idea!

Today the consolidate, run again game is dead, not the bull market. We will need a new playbook until the highs are taken out convincingly and I can't see anyone thinking that will happen for some time. We have not had a down side break to a meaningful consolidation in 4 years. This will be the start of a new game for many!

I'm not convinced yet. Our economy is cooking. Europe and BRIC are cooking. The US sub prime issue has not yet translated to weaker profits across the board. Maybe it's the start, but it's not conclusive. Normal correction for me, to be proven wrong of course!

Trembling Hand · 27 July 2007

Re: XAO Analysis

kennas said:
I'm not convinced yet. Our economy is cooking. Europe and BRIC are cooking. The US sub prime issue has not yet translated to weaker profits across the board. Maybe it's the start, but it's not conclusive. Normal correction for me, to be proven wrong of course!

When the next break high and then consolidation happens how many are going to think about the pain their long portfolios had taken today and factor in the chance of a downside break rather than just another run up? As I recall even the Bears on this forum were thinking a 'Test of Lows' not a break. I think this will change the way people think. I'm not saying the Bull is dead just the game has changed. Of course today still has to play out.

Sean K · 27 July 2007

Re: XAO Analysis

I think we could get to 6200-6150 and still be going OK. Then it gets more risky approaching the 200 d ma and last significant peak at about 6000. Breaking that, and I'll put on a bear suit. I think the diverging MACD has been a give away for the previous several weeks.

Trembling Hand · 27 July 2007

Re: XAO Analysis

kennas said:
I think we could get to 6200-6150 and still be going OK. Then it gets more risky approaching the 200 d ma and last significant peak at about 6000. Breaking that, and I'll put on a bear suit. I think the diverging MACD has been a give away for the previous several weeks.

The SPI have us at 6080 for the open!!!!!!

CanOz · 27 July 2007

Re: XAO Analysis

Will this bounce? Thats quite a gap.

Awesomandy · 27 July 2007

Re: XAO Analysis

trembling Hand said:
The SPI have us at 6080 for the open!!!!!!

It was at a nice and round 6000 just then, now at around 6050. Together with a possible crash, there is going to be a lot of volatility around. Perfect time for those who have a short-mid time frame and trade on having the volatility coming back to its normal levels in a few months time.

Trembling Hand · 27 July 2007

Re: XAO Analysis

God only knows what its like to hold a long CFD account through this kind of mess. I imagine you would have nothing left if you were 50%!

That's what I meant about.

trembling Hand said:
Today the consolidate, run again game is dead, not the bull market. This will be the start of a new game for many!

CFD · 27 July 2007

Re: XAO Analysis

trembling Hand said:
~~
I think this will change the way people think. I'm not saying the Bull is dead just the game has changed. Of course today still has to play out.

Well you picked me in one!

Seems to me (being wise after the event) that only looking for and having long positions has a risk. The risk being that no matter how good the (in my case stock) selection, they can get over run by the market sediment. This risk would be reduced if one could identify a few short positions to hold with the longs (CFDs) in an overall up trending market.

Just one little question, how do I do that.

Awesomandy · 27 July 2007

Re: XAO Analysis

CFD said:
Well you picked me in one!

Seems to me (being wise after the event) that only looking for and having long positions has a risk. The risk being that no matter how good the (in my case stock) selection, they can get over run by the market sediment. This risk would be reduced if one could identify a few short positions to hold with the longs (CFDs) in an overall up trending market.

Just one little question, how do I do that.

If you've picked good long positions, even during the bad times, they'll recover the quickest, so, in that sense, it is not too bad if you've done your homework, and have enough financial depth to ride out the troughs. As for identifying short positions, I'm not an expert in that, but from my limited knowledge, you can consider shorting an index, which will act as an insurance against the market sentiments going the wrong way. You can pick a short position that is, say, in a different sector (e.g. you think interest rates will rise very quickly, so you might short a stock or 2 in the consumer discretionary sector), or you could even short another company in the same sector (e.g. if you think bhp will rise more than rio, you can buy long in bhp, and sell short in rio, as this will also give you some protection in the resource sector).

I'm not sure how accurate I am, but that's what I know about shorting and hedging your positions.

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