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XAO Technical Analysis

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Re: XAO Analysis

nulla nulla said:
In my opinion, the volumes of trade at present reflect a lack of participation and confidence in the market, making a retrace more likely (can't see the basis for it falling to 4000 and lower though).
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Nulla what's so wrong with a low volume rise? In fact if I had to choose between high and low vol here my preference would be low, if I was a bull of course.

Why or what evidence or what thinking goes to high volume breaks are good. For everything I've seen and traded high volume into and through new highs is bad. (mostly)
 
Re: XAO Analysis

Can't have one hard and fast rule for volume IMO. I have a preference for mid-high (not ultra high) volume BREAKOUTS, buts that only because I am of the belief that less manipulation has occurred (you may call me a sceptic).

For a trending market it is too limiting to judge volume without a hard look at the surrounding factors. This rally clearly has a lack of participation, but more so a lack of sellers. No conviction what so ever on down days. Could keep trending like this for a little while more.
 
Re: XAO Analysis

sammy84 said:
Can't have one hard and fast rule for volume IMO. I have a preference for mid-high (not ultra high) volume BREAKOUTS, buts that only because I am of the belief that less manipulation has occurred (you may call me a sceptic).
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Got any examples of mid-high breaks that are successful?

That doesn't make sense, "less manipulation". If anyone is manipulating the market they need high volume to get out. You cannot move a market & get out of it at the same time on low volume.
 
Re: XAO Analysis

Trembling Hand said:
Got any examples of mid-high breaks that are successful?

That doesn't make sense, "less manipulation". If anyone is manipulating the market they need high volume to get out. You cannot move a market & get out of it at the same time on low volume.
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Will provide a few charts when I get home tonight. From memory PRGO (Nasdaq listed) was a pretty good breakout on mid- high volume ( edit: attached is chart from some free web charting package).

By manipulation I am referring to disproportioned moves. It’s a lot easier to create false breakouts on low volume rather then high. I prefer to be in moves where the probability is that they have actual conviction with locked in buyers.
 
Re: XAO Analysis

sammy84 said:
It’s a lot easier to create false breakouts on low volume rather then high. I prefer to be in moves where the probability is that they have actual conviction with locked in buyers.
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If it breaks out and no one sells into it what is that telling you?

Your "conviction with locked in buyers" is a somewhat strange concept. Something along the lines of what? confirmation? Nothing worse IMO than newbies to the party jumping in on a break. You have to ask who is on the other side supplying the volume?

Whenever I look through the most loved stocks on ASF I always see comments about high volume pushes being positive as they happen. Come back a week later and they have fallen over almost every time. Very clear that punters jump at these moves like flies to s***. Just as clear that someone else is distributing to them.

Anyway I'm sure you can find some good examples to confirm high vol is good. The idea has been around for 100 years. I just don't see it in my trading. High volume is good to stop down moves, capitulation, punters giving up to pros. And to me I see the exact same thing in reverse, punters getting distributed to by the pros.
 
Re: XAO Analysis


I tend to agree.

High volume on up moves signal time to look for an exit.
High volume on down moves signal time to look for an entry.

Weakness in strength & strength in weakness.
 
Re: XAO Analysis

Trembling Hand said:
If it breaks out and no one sells into it what is that telling you?
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Then I should hopefully have a bar closing at the top of its range. That's enough for me to have some confidence to wait and see.

Trembling Hand said:
Your "conviction with locked in buyers" is a somewhat strange concept. Something along the lines of what? confirmation? Nothing worse IMO than newbies to the party jumping in on a break. You have to ask who is on the other side supplying the volume?
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Conviction- Participants as opposed to market noise
Locked in buyers- Even if it's newbies, once they enter a position they would probably have a relcutance to sell at a loss. Plenty of time for me to get out before then. Agree with the notion of who is selling, however the concept of irrational exhuberence also applies and newbies jumping on a break can always cause one push higher. By then it is free trade time and anything can happen. Would be different however if you were looking for longer trends.


Agree, a lot of breakeven trades but only a few need to work to make money.



Agreed in relation to down moves. These sort of moves I find have a higher success rate, specially when coupled with some form of + divergence. The only problem is that the markets seems to offer these opportunities much less. I guess all this conversationsation proves is that volume cannot be judged in a vacuum.
 
Re: XAO Analysis


IMO the volumes at present are consistanly lower than the 2008 daily averages. This to me reflects a lack of participation in the market, which I interpret as a lack of confidence of traders being prepared to speculate on returns from investing or trading. I also suspect that there is less activity currently in the ASX from overseas investors/traders (but I can't prove this).
The comparison quoted on above was between the runup of the market during the Xmas New Year period when many of the professional traders were on annual leave. I saw this as a false rise which appeared to be corrected when the professionals came back from Annual Leave.
The volumes on the runup from February through March has been on higher volumes (but not at the 2008 level).
I don't put to much stock in isolated spikes in volume (upward or downward price movement) as indicative as to where the market is going longterm as there is usualy a reason attached such as irrational exhuberance (upward) or Fear (Downward).
More often than not, IMO, isolated volume spikes can present a sell oportunity or an entry oportunity.
 
Re: XAO Analysis

Hey nulla, if you have a look at breakouts on volume WITH announcements vs WITHOUT announcements, you'll find some interesting stats.

Cheers
 
Re: XAO Analysis

nulla nulla said:
IMO the volumes at present are consistently lower than the 2008 daily averages. This to me reflects a lack of participation in the market,
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I doubt we will return to those volume levels in a long long time. If we do the index will likely be around 3000 or 8000.

Who would you say are no longer participating? The pros? The punters? The OS hedgies?

IMO many punters will never return after 2008(until we get to 7000-8000), Pros will always be around no matter what the conditions & there some evidence that OS money is not flowing in as strong as it was last year (clearly from the wish washy AUD).
 
Re: XAO Analysis


I suspect the overseas hedge funds have pulled a lot of their cash out exiting on a stronger aud$ and improved share prices. I haven't seen too many notices to reflect changes in substantial holdings that would indicate they are back yet.
 
Re: XAO Analysis

nulla nulla said:
I suspect the overseas hedge funds have pulled a lot of their cash out exiting on a stronger aud$ and improved share prices. I haven't seen too many notices to reflect changes in substantial holdings that would indicate they are back yet.
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How can you say that?

AUD is a cent off 2 year highs and 5 cents from many decade highs. If funds had flow out the AUD would be getting/got smashed. But its not it going up.

When the elephants stampede its pretty easy to see their tracks.
 
Re: XAO Analysis

Trembling Hand said:
How can you say that?

AUD is a cent off 2 year highs and 5 cents from many decade highs. If funds had flow out the AUD would be getting/got smashed. But its not it going up.

When the elephants stampede its pretty easy to see their tracks.
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I watch the overseas hedge funds involvement in Australian Infrastructure shares and REIT shares. If you read back through the sector announcements re change of shareholdings you will see that there have been some large exits (specifically the Canadian Superfunds exit from mig/ito and other hedge funds from the likes of CPA, DXS, GPT, and others).
When the canadian superfund exited mig, one of the speculative reasons was the increased value of the AUD$ against the overseas currencies. Although the share price was down the aud$ was up (significantly if the funds had been acquiring when the aud$ was in the us$60 cent range).
The aud$ is not getting smashed probably because of the perceived strength of the Australian Economy on the back of the resource recovery.

The impact of the Elephants (Canadian Super Funds) stampeding out of mig is still being felt. I have their tracks across my portfolio.
 
Re: XAO Analysis

nulla nulla said:
The aud$ is not getting smashed probably because of the perceived strength of the Australian Economy on the back of the resource recovery.
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I'll have to agree to disagree on that one. For me it aint perception that makes something go up - its action. Or people paying higher and higher prices to meet their demand.


Thats why IMO the XAO looks like the AUUSD chart. Their both being bought.
 
Re: XAO Analysis


Following that logic, should not the S&P500 look like the USDAU chart?
 
Re: XAO Analysis

jonojpsg said:
Following that logic, should not the S&P500 look like the USDAU chart?
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What?

Thats not following any logic that exist in the market. Go find out what the risk trade is, and what a carry trade is.
 
Re: XAO Analysis

Trembling Hand said:
What?

Thats not following any logic that exist in the market. Go find out what the risk trade is, and what a carry trade is.
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OK so a risk trade is buying assets that are considered higher risk, eg XAO as we are more exposed to fluctuations in demand for resources, yes? And these fluctuations are more likely to be down as up. And the AUD is considered a risk asset also as its value is also tied to commodoties prices.

The carry trade is where one borrows in lower interest currencies, eg USD and buys assets in higher yielding currencies, eg AUD.

So the USD is being sold then.

On analysing the XAO then, we still need to break the resistance before heading higher - 5000 or bust. Will something emerge that changes people from risk to risk aversion? That seems to be what everyone is waiting for, hence the lower volumes. Where will the next shock come from? Is there one out there? If not, it will take time for people to believe that, as the big guys are great at hiding the crap they have gotten us all into until they have had time to get out.
 
Re: XAO Analysis

jonojpsg said:
OK so a risk trade is buying assets that are considered higher risk, eg XAO as we are more exposed to fluctuations in demand for resources, yes?
Click to expand...
No the risk trade is a general term to group a whole heap of trades that are occurring post 2008. They are a variation on the carry trade. Not necessarily across borders but can include that.

For example borrow money in USD, EUR, JPY & GBP (which are low interest rate) and invest in higher yielding (interest & capital return) instruments. That can include equities within the same country or outside, commodities, growth economy FX and growth economy bonds/interest rates.
 
Re: XAO Analysis

Here is a chart of the XAO with a top secret, super duper divergence code: that has proven to be very reliable in the past.

It basically gives an indication of how many stocks are trending up or down based on - well that's the secret bit:

You can see how it picked up divergence before the last fall after making new highs in Jan.

While it is now telling me that less and less stocks have been participating in this rally and there is some underlying weakness in the market. It is also sending a bit of a warning that more stocks could be beginning to join in which could push us higher. Due to the nature of how this indicator is constructed there can actually be a bit of lag as stocks move into a position to be counted as trending up.

I certainly would not be shorting the market here with any sort of confidence, the market is in a bit of a strange phase atm and I'm having a bit of trouble having any real conviction either way but I do favour continued strength at this stage and my best guess is a move to around 5035-5050 this month and then review things from there if we make it. There is also a chance we could go towards 5160 this quarter.

The market will probably tank now that I've made my "prediction" so load up those shorts
 

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