XAO Technical Analysis

[Starcraftmazter]

I think people (I know I am) are sick to death of Euro crisis. It's never ending. Headlines change on an hourly and daily basis. Latest I heard was that Greek bond investors were seemingly happy to accept a 70% loss on their bond investments (ABC Radio News this morning). So why not just accept 100% and be done with it.

My theory is that EU wants banks to write down debt (ie. take losses) one step at a time, so that they have a chance to absorb the losses and get more capital gradually as opposed to one big loss which would stress the market a lot more.

I'm sick of it, I think the markets sick of it. Good or bad resolution, any resolution will be good news for the market IMO. I'm not saying that if there's a default the market will not fall, but after any initial shock, it will be onwards and upwards.

That's one perspective. However consider that once the Greek fiasco is over, attention will immediately turn to Portugal. It is in the EU's best interests to milk Greece for all it's worth, and keep everyone's attention there while they get their house in order - in terms of bank capital raisings and sorting out the fiscal situation in the rest of the PIIGS.

Mind you, IMO high aussie dollar is not good for our market. OS investors are happy to just stick the money in our banks and earn ~4%. Everyday Aussies are too gun shy of the market. My two cents, the large funds have been sheepishly buying and keeping under the radar.

Agreed, let's hope that Friday was the beginning of at least a short term downward correction in the AUD. If so, it should give our market some added strength.

 

[Edwood]

looking like we might finally get a general kick higher, assuming XAO can crack this resistance. could see a run to the 4600 area

 

[tinhat]

I appreciate that many of the regulars on this forum appear to be slogging it out in the Gillard v Rudd, Gillard v Abbott discussions in other parts of these fora at the moment but, in case people haven't noticed...

It was an interesting week for the XAO. This week the XAO closed above the 200 day moving average for the first time since 1 June 2011. It did this on Tuesday and has been able to hold above the 200 day MA at close every day since. The 10 day moving average has been above the 30 and 50 day moving averages since mid January. Personally, as I am not a trader, I like to compare the 10 week MA against the 30, 40 and 52 week MA. This week the 10 week MA closed above the 30 week MA for the first time since early June 2011.

There have been some good results come through for specific companies this reporting season with the exception of non-bank financials, retail and miners (although there have been some excellent individual results for some miners). There still seem to be lots of value buys available especially for income seekers and especially for those wanting franking credits. Macro news has not been all doom and gloom lately. Volumes traded have been steadily rising since the beginning of the year.

It will be interesting to see if the XAO can break resistance at the circa 4400 mark or whether this is just a relief rally and if it retraces from there. The squeeze is on for a move either way. One the weekly chart, since the low of August, the lows have been getting higher but the highs have not been able to sustain a break out above 4400.

Good luck to all.

 

[wintermute]

It's been quite a while since I posted my long term XAO chart but I thought I'd trot out the latest iteration of it.

I just added the CCI to it, and it seems that looking at the bottom horizontal line could be a reasonable indicator of market bottoms (or perhaps a little before) Of course being a monthly chart you aren't going to be able to make to the day calls on this, and it may only really show in hind sight.

I've been thinking for quite a while we will see that bottom trend channel hit again and after that happens the long slow recovery will start. based on that my personal opinion is that any recent gains is a rally which will probably end with a reversal going back to that bottom trend channel, of course I could be completely wrong

*most* of the predictions I've made with this chart over the last 6 years though have been pretty accurate in the scheme of things.

Tony.

 

[Starcraftmazter]

I am personally rather sceptical about a sustained short-term rally.

There's quite a bit of economic data out early next week including ours, which I think will make (or more likely break) this rally.

Another potential problem might be if the PSI deal of Greece falls apart.

 

[Garpal Gumnut]

looking like we might finally get a general kick higher, assuming XAO can crack this resistance. could see a run to the 4600 area

I appreciate that many of the regulars on this forum appear to be slogging it out in the Gillard v Rudd, Gillard v Abbott discussions in other parts of these fora at the moment but, in case people haven't noticed...

It was an interesting week for the XAO. This week the XAO closed above the 200 day moving average for the first time since 1 June 2011. It did this on Tuesday and has been able to hold above the 200 day MA at close every day since. The 10 day moving average has been above the 30 and 50 day moving averages since mid January. Personally, as I am not a trader, I like to compare the 10 week MA against the 30, 40 and 52 week MA. This week the 10 week MA closed above the 30 week MA for the first time since early June 2011.

There have been some good results come through for specific companies this reporting season with the exception of non-bank financials, retail and miners (although there have been some excellent individual results for some miners). There still seem to be lots of value buys available especially for income seekers and especially for those wanting franking credits. Macro news has not been all doom and gloom lately. Volumes traded have been steadily rising since the beginning of the year.

It will be interesting to see if the XAO can break resistance at the circa 4400 mark or whether this is just a relief rally and if it retraces from there. The squeeze is on for a move either way. One the weekly chart, since the low of August, the lows have been getting higher but the highs have not been able to sustain a break out above 4400.

Good luck to all.

Thanks E and th,

I would agree, I think this may be the start of a wave 3, then again .....

gg

 

[wintermute]

On looking at my long term xao chart again, specifically the CCI indicator every occaision that that bottom line has been hit, there has been a rally after it. Some of those rallies were short, but most were big ones. There is currently a divergence showing. The cci has bounced off that bottom line, but there has still be some downward movement in the index. The same thing happened just before the bottom in 2009.

If we follow a similar pattern to 87 (which so far we have as indicated in my chart) then we could now be at the double bottom and ready to start the long slow recovery. We could potentially be pretty close to the end of the 2007 crash. I was pretty sure we would hit that bottom trend channel before that recovery started, however taking into consideration the CCI I'm not so sure anymore.

World events and GFC II of course send us off on a tangent for which there are no precedents in the current chart.

Tony.

 

[Gringotts Bank]

Symmetrical triangle still by far the most dominant pattern for the Ords. However the lines have changed a bit so here's an update.

 

[Gringotts Bank]

Sitting squarely on the brink of a big triangle breakout (top thickened line). The last symmetrical triangle break (inner lines) saw two revisits of the breakout line soon after, and so I'm assuming that's what will happen here again, ie. small breakout followed by a revisit to the trendline.

 

[nulla nulla]

Sitting squarely on the brink of a big triangle breakout (top thickened line). The last symmetrical triangle break (inner lines) saw two revisits of the breakout line soon after, and so I'm assuming that's what will happen here again, ie. small breakout followed by a revisit to the trendline.

The xao appears to be meeting significant resistance when it head buts the 4390 level. If it isn't Greece or one of the other over stretched soveriegn debt euro nations causing a run off in the finance sector, it is fears of a hard landing in china causing a retrace in the resources sector.

We seem destined to retrace from this level of resistance with our progress more closely linked to the fluctuations of the shanghai index than the rebounds of the djia, nasdaq, ftse and dax.



The last two lows this year have been lower and if we don't break through the 4390 level now we are probably destined to test 4220 and lower.

 

[Sean K]

World events and GFC II of course send us off on a tangent for which there are no precedents in the current chart.

Tony.

Hi Tony. I think some of the Black Swans are factored in at the moment. We expect there to be an oil shock due to the pending US and Israel attack on Iranian enrichment facilities. An extended civil war in Syria fought by western / Iranian proxies will be a non event. Pakistan, who cares. EU breakup, blah blah blah. It's all in the mix. I feel not much can send us in a downward spiral. Bounce likely.

 

[Starcraftmazter]

Hi Tony. I think some of the Black Swans are factored in at the moment. We expect there to be an oil shock due to the pending US and Israel attack on Iranian enrichment facilities. An extended civil war in Syria fought by western / Iranian proxies will be a non event. Pakistan, who cares. EU breakup, blah blah blah. It's all in the mix. I feel not much can send us in a downward spiral. Bounce likely.

Are you saying that an attack on Iran and an EU breakup are factored into the markets? I would seriously disagree.

The Australian economy has been doing poorly. All recent data has been absolutely terrible. To top it off, China is slowing down and the government is adamant to continue with it. There is no particular reason for our market to break out to the upside.

 

[Sean K]

Are you saying that an attack on Iran and an EU breakup are factored into the markets? I would seriously disagree.

There is a lot of bad news factored into the charts. These are but 2. There is good news factored in also. I agree that you are serious.

 

[Starcraftmazter]

If Iran was attacked, I am fairly certain the markets would tank pretty hard. Are you suggesting there would be little or no reaction?

If there is an EU breakup, that is a financial Armageddon.

 

[Sean K]

If Iran was attacked, I am fairly certain the markets would tank pretty hard. Are you suggesting there would be little or no reaction?

If there is an EU breakup, that is a financial Armageddon.

Iran has been attacked. As has Syria. The secret wars go on. I think a decisive NATO mass assault may even be a catalyst for the market to go higher. Caveat is if that creates an oil spike. That would probably only happen if Iran chips in. Persia is a very smart country and will realise that if they go too far they are outnumbered. The US just needs the slightest reason to go all out in the Gulf. As do GB and the frogs.

All this effects the 'technical analysis' by the factoring in of perceived future market influences.

A 'Black Swan' would have to be an absolute monster I think.

 

[Starcraftmazter]

I think a decisive NATO mass assault may even be a catalyst for the market to go higher. Caveat is if that creates an oil spike. That would probably only happen if Iran chips in. Persia is a very smart country and will realise that if they go too far they are outnumbered.

Iran is the 3rd largest producer of oil, and it is not particularly far behind Russia nor Saudi Arabia. Please explain how in the world the markets will rise if they are attacked. Markets have tanked and recessions have happened because countries which produce 100 times less oil as a proportion of the world total stopped exporting.

The US just needs the slightest reason to go all out in the Gulf. As do GB and the frogs.

The US needs a war with Iran like a hooker needs aids. Not a single general in the US military thinks it is a good idea. There is simply no way in hell any conflict with Iran can go well. The US should be praying that Israel will not need help defending themselves.

Iran's first course of action is to send millions of militia into Iraq and de-stabalise the country...just as the US is pulling out.

There are just countless ways in which this is an absolute nightmare.

Iran has modern anti-aircraft weaponry. There has only been one conflict where advanced anti-aircraft weapons were used - in the history of this planet. Aircraft were basically useless in it.

 

[tinhat]

A golden cross formed on the XAO weekly chart at the close of last week. 10 week MA (green) crossing above 40 week (red).

The MACD on the weekly is almost hitting zero. If the XAO has another positive week, the MACD should cross above zero.

Weekly chart below.



On the daily chart, if the XAO holds up next week a golden cross should form too - 50 day MA (green) crossing 200 day MA (red). Note that the MACD turned positive last week.

 

[Sean K]

One of these zones/lines likely to break soon.

I'm bearish on the world, but I think the world is more bearish.

 

[Sean K]

One of these zones/lines likely to break soon.

Just poked it's head above, but will it respect the support and make it through 4500?

 

[Gringotts Bank]

I think another down day tomorrow to give a lower low pivot - target 4300 approx.

Then a push back up to 4370 approx.

Then back down.