Thursday, November 18, 2010

XAO Short term Update

Looking for confirmation of a 5 wave decline

The very short term XAO has completed a 3 wave decline and as described in the last post, a decline to around 4690 would most likely occur. The XAO hit 4695, before climbing up to 4726 today. The expectation is for more declines to complete wave '3' circle which doesn't appear complete. The MACD price oscillator (not shown) has plenty of room to move on the downside and no divergence is evident as yet.

Should the decline not occur, then channel lines (as shown) are needed to define the upside area that the XAO can be allows to operate within. As discussed in previous posts, breaking the upside channel line will bring into doubt the count as well as potential stops that could be used to reduce risk.

Wednesday, November 17, 2010

Australian Financial Sector - Long Term update

The Australian Financial Sector index - XFJ, has not declined in smooth waves of 5 from the all time high like the XAO. Instead, the XFJ has declined in waves of 3 and the decline has been difficult to predict due to a lack of 5 wave moves. However, if we were to use the same assumption as the long term XAO - a zig-zag correction down to the 100yr trend line, then we can assume (for the moment) that the XFJ will zig-zag lower but with a triangle for Wave 'B' circle.

Thus, the rules for a triangle need to be observed until proven wrong as shown below with expected paths for waves 'd' and 'e' labeled:

Tuesday, November 16, 2010

Short Term XAO update

The Australian All Ordinaries index appears to have completed a small flat correction for wave '2' circle as described in the last post and going against the decline in the US markets for the first 4hrs of trade.

The declines near the end of trade today are expected to continue down to around the 4690 level where wave '3' circle should terminate.

Friday, November 12, 2010

Ending Diagonal Complete - What Next?

The All Ordinaries is bouncing off channel support, but it appears a small 5 wave decline has been completed in order to get there. There is potential for one upwards push in the next couple of trading days to complete a flat correction for wave '2' circle (as shown) before further declines are expected to develop.

It should be noted from this post that a possible wave '2' top (from 2 high potentials) was expected at 4874 based on Fibonacci relationships of prior waves, the XAO pushed above this level by only 10 points before commencing the decline - showing Fibonacci provides some very useful "suggestions" for turns.

I also need to update my chart that shows the moon cycles compared with EW counts on the XAO - a post for later.


Tuesday, November 9, 2010

The case for Wave 2 completion

The XAO has declined after slightly exceeding the 76.8% retracement level and after completing an ending diagonal wave.

Discussed in the last post there was a distinct possibility that there would be a throw over of the 1-3 trend line in the ending diagonal on higher volume before declining.This has occurred, and signals an end of the current trend (at least in the short term).

The decline now needs to commence in 5 waves down thru the channel support lines (not shown) in order for a convincing start to wave '3'.

Tuesday, November 2, 2010

The pending RBA Interest Rate decision

It's that time again. Last month the RBA kept interest rates on "hold" even though there was a case to raise them based on the cash rate lagging the 90 day bill rate by almost 0.5%. Today, the 90 day bill rate hasn't much moved since the last RBA meeting and hence there is no case to adjust the Cash Rate Target.

As you can see in the chart below, there have been extended periods of time where the 90 day bill rate has remained range bound for up to 12 months at a time and the Cash Rate Target has remained unchanged during those periods too. This won't stop the MSM from squeezing out the usual hype on interest rates every month - instead of looking at the charts :-)


The RBA increases rates today by 0.25%. The only logic in this decision was because the rise was delayed from last month due to the election - as a rate rise straight after the election would put undue pressure on the Government.

The RBA Cash Rate Target is now where it needs to be based on historic relationship with the 90 day bill rate as discussed in the previous RBA post.

Monday, November 1, 2010

Ending Diagonal Forming on the All Ordinaries?

Since mid September the XAO index has moved in waves of 3, which has provided difficulty in establishing a firm count over the short term. However, there is strong evidence that wave 'iv' is an expanding triangle and the move upwards since the 5th Oct is an ending diagonal. Ending Diagonals must have overlapping wave 2 and 4's, move in waves of 3 AND wave 3's must not be the shortest wave. Therefore wave '5' circle cannot be longer than wave '3' circle in the current scenario.

Wave '4' circle could still be developing (possibly as a triangle), however the upside target should still be  around 4800 or slightly higher, perhaps with a throw over on higher volume.

The MACD price oscillator still continues to be divergent against the XAO on the 60 minute and daily charts. (MACD will usually hit an extreme near the completion of wave 3's, or wave 3 or 3 etc, and be relatively consistent at different time scales).

The bigger picture is here