Aren’t markets cruel? Just when everyone was starting to relax (turn bullish) the markets pull one of its tricks – 200 point fall in the Dow. I mentioned last week that I usually like to see a bit of a panic to complete a fourth wave so of course it had to deliver. Also ran up perfectly into my timing box of 16th/18th which was scheduled for a top. But to keep things in perspective, the SPX is still two points higher than at this time last week.
The support in the SPX comes through at 1420/1425 with the next area around 1400. Despite the mini panic on Friday, during the week we saw the Advance/Decline of the NYSE move to a new high. This would tend to suggest good underlying strength in the market and not the type of behaviour we would normally witness at a major peak.
My next timing box comes through on 13th/16th November which again should be a high.
The big news however, was the performance of our own market this week after a brilliant advance since the middle of last month. Many stocks and indices have broken long term downtrends and moved above heavy resistance areas. This gives considerable support on any correction and I think improves immensely the longer term picture on our market. Far too many important breaks to cover here but just looking at some of my key stocks and indices, I have to start with the STW (An ETF on our index). To my mind this is by far the best indicator for our market. It has broken its long term downtrend from the 2007 high and at the same time broke topside out of a nice base pattern and has already run on to meet its first target area. Good support has now been set up around 41.50/42.00. The Twenty Leaders index comes next on my list of priorities (because as mentioned previously, I see this as the best barometer of ‘big money’). Here again the rise this week was enough to break a long term downtrend that I have been following for many weeks. Good support now exists around 2650/2700.
NAB hit a speed hump after a terrific rise but the area around $25.00 to $25.50 which had been a heavy resistance area will now give excellent support. The Commonwealth Bank got up to the long term trend line drawn through all the tops from late 2007, including two tops in early 2010 and plus the high hit earlier this year. Not surprising that some selling came in when this trend line was hit this week. Of course MQG wasn’t left out and ran through to its next target after also breaking its long term downtrend and making a topside break out of a short term triangle. Even AMP broke out of its base pattern – so we must be going to have a bull market!!!
The XJO might even come all the way back to 4400 without causing alarm but I think it will find good support just below 4500. However, this reaction plays out, I think the sideways work the Australian market has done over the past year is going to stand us in good stead.
I had been a little uneasy with this decline in coal prices over the last couple of weeks. Looked a bit better by the end of last week. A little bit more of an uptick here and it will break the short term downtrend. Could be worth watching (Friday’s close $83.80. http://www.indexmundi.com/commodities/?commodity=coal-australian&months=60 ) I mentioned previously that there had been considerable interest in coal stocks in the US – as a result of the natural gas price having a good bounce – but I was a little cautious on our stocks in this area. But if coal prices do pick up a little more then perhaps this area might come more into focus.
I have indicated before that I am very interested in the trend of markets in Asia. India has been at the top of that list as I see it forming a nice base pattern with the high probability of pushing through to new all time highs over coming months although it is a bit overbought short term. I see India as a great area for Australia to build on. Japan is also coming into focus. For more than 20 years the right advice has been – forget it. Not saying it is a buy but I am interested for the first time in ages. Indonesia has a fabulous chart that is a bit overbought short term but will go higher. Thailand is unbelievable and just shows what can happen when the focus switches to a particular area. China has been very frustrating but actually if you dig a bit deeper on that market, some stocks have been having really good rises. Also the ETF’s traded in New York have had some big moves – actually got very overbought . Interestingly the pattern of the SSEC (Shanghai) is virtually a carbon copy of the Advance/Decline that I keep of our mining section. In fact the mining A/D has been a wee bit stronger recently after being in a disastrous downtrend for many months. All very interesting and just shows how tied to the Chinese market our miners are. I think things might get a lot more exciting in this area over coming months.
This will be my final Ramblings for a while. This week we are going overseas and as soon as we return I have a hot date with a gorgeous neurosurgeon which is likely to keep me occupied for some time... So trying to look a bit further out... if the SPX continues to follow the path it has been on, I think it still has another wave up to come. I think Australia could well be one of the top performers once the next wave up gets underway. I still believe commodities have a big move ahead – probably find support in gold around $1700 but they may get it a bit lower without causing too much concern.
But I have to stress as usual, New York has had a huge rise and perhaps I have counted the wave incorrectly and the recent top was more important than I thought. But I do not think we have had the type of enthusiasm that markets usually see before major tops. In fact the entire rise since June has been dominated by bearish opinions – talk about markets rising on a ‘Wall of Worry’.
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