Friday, August 20, 2010

More sideways on the XAO?

The Australian All Ordinaries appears to still be unfolding sideways with wave (ii) of '3' and I suspect a small push upwards may be needed to complete (ii).

The real question is whether the Labor or Liberal party will win tomorrow's election.  The outcome will not affect the market, but there is a high possibility that Labor will retain leadership as the social mood in Australia is not at a extreme low to warrant a change of Government. Labor did undertake a dumping of prime minister Rudd to avoid losing on election day - a very good strategy in hindsight which seems to have brought stability to the party.

In bear markets, Governments typically aim for more control, grow much larger, budgets are wasted on stimulus (same as in 1929), new ways to collect more tax credits is sought and misleading the public to drive change are typical attributes. These can all be witnessed today in both sides of politics in Australia.

The worst possible outcome is to allow either party a majority in the senate. A Labor/Green alliance would give unprecedented control to the Government and Australia would see the introduction of aggressive 'green' laws, a Carbon Pollution Reduction Scheme and most likely a revisit of the Copenhagen treaty which is a demonstrated front for a World Government - The very attributes of control which occurs in recessions/depressions.

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