XAO Technical Analysis

[Trembling Hand]

Re: XAO Analysis

Whilst I think that this is interesting information it could also be better utilized when used with other methods.

Exactly. One chart does not make a good setup IMO too. That's why I use this one, the XAO/XJO and a whole heap of other stuff. Just another tool to dig into the market.

Owning one shovel doesnt make you a tradesman.

 

[Bushman]

Re: XAO Analysis

A couple of points:

I don't follow Merril Lynch. I have no idea if their current share price reflects it's intrinsic value. You've cited one analysts opinion who says the effect of the current credit crisis is already reflected in Merril's valuation.

Noone really knows how deep this credit squeeze will go or for how long it will last. We do know it has just begun and it will get worse. To be making the call at this point in the game that the problems in credit markets are reflected in Merrils price IMHO is premature.

Remember the first estimates of potential losses in a credit crunch are usually the kindest.

I am not commenting on Merril's performance? I was using it as an indicator for the financial sector. I agree - it is one broking houses opinion amongst all the other opinions. What stuck in my mind was that the valuation had an expectation of some credit fall out factored in the share price.

I agree that the credit situation has a lot further to play out. However my point is that the market will start to factor that in to the share price. If the situation deteriorates and further affects the overall liquidity of the market and consumer sentiment, then there will be further corrections. However that may lead to a reduction in US interest rates as Bernanke chooses to place a floor on the US markets at the expense of being an 'inflation fighter'. All idle speculation at the moment.

For what it may be worth, I am still expecting a bumpy ride here and in the US over the next few weeks, a smoother September and then further volatility in October. As for longer term (1 to 5 yrs), I think global economic growth will be the winner as 2 billion Chinese and Indian consumers attempt to have what we have. It will be interesting to see how the Chinese autocracy deals with an increase in consumer might as well. After that - who cares? I will hopefully be living on an organic farm in the Byron Hinterland.

Great chart TH. Very useful and informative tool. Would be more than interested to see it at the end of two weeks and then at the end of September.

 

[Jadefox]

Re: XAO Analysis

Wavepicker,

I wonder if you'd mind recommending some learning material on pattern and time - perhaps your favourite book/course on elliot wave and the same on time/cycles?

I have some understanding of these but nowhere near deep enough.

 

[>Apocalypto<]

Re: XAO Analysis

Interesting information TH, You can also get A/D ratio(Breadth) info at www.bigcharts.com if you have use for this sort of info.

Whilst this is interesting information in that it gives you an idea that the market is slowing, that's all it does. Despite the momentum slowing this can be deceiving in that the market can hold up for quite a long time before moving in your desired direction of speculation. So how one goes about perfoming precision swing trades and timing using such indicators and other lagging indicators in isolation is beyond me. Whilst I think that this is interesting information it could also be better utilized when used with other methods. IMO the three most important factors in order are as follows:-

-Pattern
-TIME
-Price Level

Cheers

Great Post WP,

the lagging issue is the main reason I have cut my reliance on indicators to a bear minimum as well.

-Pattern
-TIME
-Price Level

excellent information there for anyone looking to take the next step in becoming a pure chartist.

good trading

 

[Trembling Hand]

Re: XAO Analysis

Great Post WP,

the lagging issue is the main reason I have cut my reliance on indicators to a bear minimum as well.

-Pattern
-TIME
-Price Level

excellent information there for anyone looking to take the next step in becoming a pure chartist.

good trading

Is divergence not a pattern?????

Is Indices making highs on less advancing stocks a lagging indicator????

 

[wavepicker]

Re: XAO Analysis

Is divergence not a pattern?????

Is Indices making highs on less advancing stocks a lagging indicator????

Thanks TI, just my 2c worth.

I like you have been throught he "indicator phase" during the early stages of my trading and was severely dissapointed more often than not focusing more on the indicator and thus trading the indicator and not price. Using lagging indicators is like chasing shadows across the wall.

Trending Hand,

Ofcourse advancing issues Vs declining issues is not a lagging indicator. I was actually referring more to the use of the 50 EMA and other lagging indicators

Having said that the advance/decline indicator is not a leading indicator either, but when used in combination with what you refer to as "idiot wave" and alongside volume analysis, it can be extremely helpful. But one needs a thorough understanding of these disciplines to understand what I am trying to say here. For example in a 3rd wave in many cases volume and breadth will be expanding, however one of the clues ON OCCASION of validating or even figuring out you are in a fifth wave(apart from pattern alone) is by this very indicator and volume. This is because the market "thins out" coming into a top as people only end up buying the good bluechips or "the ones they can depend on", which ultimately is a mistake also. There are better (more consistant) ways to validate a fifth wave I have learned long ago, but with regard to indices this is still one that can be used.

As for a divergence being a pattern, sure. But let's look at it. It's a pattern of advancers vs decliners not of price, thus no cycles/time information can be interpreted from it, so for timing a trade it probably pretty poor, perceived divergences can easily unwind and be false signals especially in a strong bull market. Price patterns on the other hand can be symmetrical in terms of geometry and some instances certain types of shapes by their very structure can give you very valuable clues to the probabilities of certain types of pattern that may follow. Isn't the behaviour of price and the way markets move the best indicator of all?? The study of types of trends and patterns within the trends is the basis of succsfull trading. Once this is learned, then indicators might be used as a confirmation or validation .

Cheers

 

[Trembling Hand]

Re: XAO Analysis

Thanks TI, just my 2c worth.

I like you have been throught he "indicator phase" during the early stages of my trading and was severely dissapointed more often than not focusing more on the indicator and thus trading the indicator and not price. Using lagging indicators is like chasing shadows across the wall.

Trending Hand,

Ofcourse advancing issues Vs declining issues is not a lagging indicator. I was actually referring more to the use of the 50 EMA and other lagging indicators

Having said that the advance/decline indicator is not a leading indicator either, but when used in combination with what you refer to as "idiot wave" and alongside volume analysis, it can be extremely helpful. But one needs a thorough understanding of these disciplines to understand what I am trying to say here. For example in a 3rd wave in many cases volume and breadth will be expanding, however one of the clues ON OCCASION of validating or even figuring out you are in a fifth wave(apart from pattern alone) is by this very indicator and volume. This is because the market "thins out" coming into a top as people only end up buying the good bluechips or "the ones they can depend on", which ultimately is a mistake also. There are better (more consistant) ways to validate a fifth wave I have learned long ago, but with regard to indices this is still one that can be used.

As for a divergence being a pattern, sure. But let's look at it. It's a pattern of advancers vs decliners not of price, thus no cycles/time information can be interpreted from it, so for timing a trade it probably pretty poor, perceived divergences can easily unwind and be false signals especially in a strong bull market. Price patterns on the other hand can be symmetrical in terms of geometry and some instances certain types of shapes by their very structure can give you very valuable clues to the probabilities of certain types of pattern that may follow. Isn't the behaviour of price and the way markets move the best indicator of all?? The study of types of trends and patterns within the trends is the basis of succsfull trading. Once this is learned, then indicators might be used as a confirmation or validation .

Cheers

Yep. I agree.

 

[>Apocalypto<]

Re: XAO Analysis

Is divergence not a pattern?????

Is Indices making highs on less advancing stocks a lagging indicator????

Dont take it personally TH no one is attacking you or your chart. I personally, at the moment have moved away from using indicators as my first port of call, I look at the pattern of the price action. CCI18 is a back up to my thoughts. In the very near future I will drop indicators all together. I used to use a MA + MACD cross over system. but I felt i could not see why things were about to happen I only saw it happing and after the most important time to act, which I am slowly strating to see now. This suits me more and is the path I am taking. Whatever works for u is great.

I personally agree with wavepicker i think his post is excellent, there is a whole new world out there away from indicators.

XAO

Yes I see divergance in the CCI now as well, that does not say it will break out all it says is in the last few periods there is alot of buying pressure.

Last Friday the cci told me to buy the XJO and that would have been a guaranteed stop out, but the price told me to stay out and on Friday night it fell. I did not know it would fall for sure but the action on the us and xjo warned me that it was not strong.

XAO cont:

Currently for this moment it looks like a base is being felt out. on the dow much more so, is this accumulation? I can not tell u that at this current time. What I can tell u is maybe this is a consolidation pattern to more selling or it may be a bottom time will tell. the indicators will only tell u what the current price action is telling them. Divergence is not a guarantee its only a guide to the possible.

 

[theasxgorilla]

Re: XAO Analysis

I feel compelled to chime in:

1. TH, I believe what you identified via AD vrs XAO analysis is a discrepancy caused by the market-cap weighting of the index. BHP, RIO and until recently the financials leading the charge and pushing the index to new all-time-highs.

2. All, people who use indicators are not in technical analysis kindergarden. It is not a forgone conclusion that the evolution of a technical trader is via simple tools like moving averages toward exotic technical analysis techniques like Elliott Wave or cycles analysis. No one knows how the markets work, but at the core of every successful trader I bet you will find a belief that they have something that works. Belief in the paradigm is key, not necessarily the paradigm itself. Many things work. Some intellectuals can't believe that it can be simple so they find a complex paradigm through which to view the markets.

3. All, people who do not appropriate indicators like you do are not lesser traders. I know two traders who appropriate the same toolset differently. One is an intellectual, the other is a multi-millionaire and the person who developed the toolset they follow is dead. Who does it the right way?

 

[wavepicker]

Re: XAO Analysis

I feel compelled to chime in:

1. TH, I believe what you identified via AD vrs XAO analysis is a discrepancy caused by the market-cap weighting of the index. BHP, RIO and until recently the financials leading the charge and pushing the index to new all-time-highs.

2. All, people who use indicators are not in technical analysis kindergarden. It is not a forgone conclusion that the evolution of a technical trader is via simple tools like moving averages toward exotic technical analysis techniques like Elliott Wave or cycles analysis. No one knows how the markets work, but at the core of every successful trader I bet you will find a belief that they have something that works. Belief in the paradigm is key, not necessarily the paradigm itself. Many things work. Some intellectuals can't believe that it can be simple so they find a complex paradigm through which to view the markets.

3. All, people who do not appropriate indicators like you do are not lesser traders. I know two traders who appropriate the same toolset differently. One is an intellectual, the other is a multi-millionaire and the person who developed the toolset they follow is dead. Who does it the right way?

Hello ASG,

Firstly there is no right or wrong toolset. In the end it’s all up to your interpretation and then application.

I am basing my comments on my personal experiences using lagging indicators over the years. I have had very mixed messages from using such indicators like MA’s and that is not to say I have completely abandoned such concepts as I still will use a MACD on occasion in combination with other methodologies. There are individuals that swear by the use of certain indicators and then there are those whom if you gave tomorrows newspaper still would not be able to trade profitably. Use what works for you CONSISTANTLY, for me I was unable to be consistent with such tools, and had more success and less distractions simply by looking at price.

Most traders using a simple MA’s for example don’t even know what the MA is representing, it’s strengths, its limitations, not to mention that they using it plain wrongly. An MA is probably the most useful indicator one can use if used correctly. Ask yourself what is an MA representing?? It’s representing the sum of the cycles greater than the span selected for that average. But there is a catch; the last data point for example in an MA is not representing the average of the span of the last X amount of price points. To do this one has to displace the average backward in time by the span/2 such that it’s in phase with price and now you have a leading indicator.

In terms of being simple, well that depends on the individual doesn’t it?? What is exotic about Gann or EW?? With EW for example it comes down to pattern recognition more than anything. The key is to first learn about trends, types of trends and patterns as well as how markets move. This is paramount IMO. Gann, EW, Cycles, time studies can then me integrated within this if one desires.

The market is a complex beast, and whether you use exotic/complex tools or even just simple ones such as a simple MA is up to personal preference. In the end it boils to deciding 3 things:-

-deciding when the market is trending
-participating in that trend
-recognizing when that trend is at risk of ending


Using an MA to determine this IMO just does not do the trick for me, especially when trading derivatives where TIMING is paramount.


If I had to start all over again, I would just focus on price and the patterns of the trends. That is simplicity ASG

Cheers

 

[Trembling Hand]

Re: XAO Analysis

Hey guys, be nice.
My Chart was just to show the problems with an index that is way to top heavy. I was not banging the table saying this is THE indicator we all must use. I thought it was just a good example of recent distribution more so than the XAO chart. Nothing more.
For me it will always be each to his own. MAs, MACD, EW, Fundamentals, the Stars, Dart board, whatever. They will all work for someone.

 

[steven1234]

Re: XAO Analysis

I was expecting the market to tank today on news of an interest rate rise. It looks like the rise was expected and factored into prior days trading.

This makes the current "bargains" in the market look even better.

 

[CFD]

Re: XAO Analysis

ASX, TI, TH and WP

Congratulations on this latest friendly banter. By offering your views and not taking responses personally you have collectively provided some very interesting posts that have been most enlightening.

 

[steven1234]

Re: XAO Analysis

Time for some conspiracy theories....

Speculation was that the correction was triggered by selling by hedge funds liquidating to pay up calls from lenders due to sub prime worries. The hedge funds sold the good stocks as no one would buy the loans.

This is where the conspiracy theory comes in.... There was lots of super money sitting on the side lines waiting to get into the market. Now the funds are not stupid to plough it into the market prior to the end of financial year (immediately upon receipt). They have waited until there was weakenss to buy in cheap, and to help this opportunity arise they have helped the correction occur by selling up to cause fear in traders. Once the prices dropped they were the only ones buying shares on the way down.

Ie the current correction was an exageration caused by instutional investors who manipulated the market so they could park the super $$ they were holding as cash.

Anyone think there may be some thruth to this conspiracy theory?

 

[Trembling Hand]

Re: XAO Analysis

Time for some conspiracy theories....

Speculation was that the correction was triggered by selling by hedge funds liquidating to pay up calls from lenders due to sub prime worries. The hedge funds sold the good stocks as no one would buy the loans.

Ie the current correction was an exageration caused by instutional investors who manipulated the market so they could park the super $$ they were holding as cash.

Anyone think there may be some thruth to this conspiracy theory?

If I had to choose between a Conspiracy i.e. Market Manipulation by the big boys the world over....

Or Stupidity i.e. too many ignoring a Fundamental problem (Credit Markets Imploding) and to many Long and leveraged in to few stocks to late in a run.

I will always take the stupidity as the cause.

 

[CanOz]

Re: XAO Analysis

ASX, TI, TH and WP

Congratulations on this latest friendly banter. By offering your views and not taking responses personally you have collectively provided some very interesting posts that have been most enlightening.

I agree folks, i've really enoyed this.

Cheers,

 

[insider]

Re: XAO Analysis

It's simply playing done by the big boys... The XAO fell more than the US markets yet it's an american problem with minimal exposure to the XAO... I think people forgot that our biggest trading partner is China...

 

[billhill]

Re: XAO Analysis

I think people forgot that our biggest trading partner is China...

Don't forget though insider that china's biggest trading partner is the US. If the US are buying less from china then china will buy less from us. I think the biggest concern regarding the subprime is that it sparks a US recession and that it flows on to everyone else.

 

[insider]

Re: XAO Analysis

Don't forget though insider that china's biggest trading partner is the US. If the US are buying less from china then china will buy less from us. I think the biggest concern regarding the subprime is that it sparks a US recession and that it flows on to everyone else.

I suppose, however it still doesn't justify XAO's sharper fall... The saying goes that when the US sneezes Australia catches a cold... This time it was more like Influenxa type A... Lets put things into perspective and keep a closer eye on these things from now on as the walls are showing cracks which can only mean there's something wrong in the foundation...

 

[tech/a]

Re: XAO Analysis

Originally Posted by tech/a
I'm looking for a larger pattern here,than previous "corrections"
So rather than a 3 wave I'm looking more at a 5 wave initial corrective move.

Seems to be on track.