This week I thought I would start my notes by having a closer look at the situation in the Australian market using the XJO.
Beginning with the daily high/low. I had previously suggested that if it could get above 7200 and then do some consolidating, we might find that the previous highs at around 7600 would be beckoning. It actually went a bit higher in this initial break of 7200 than I had anticipated but is now consolidating. It is going to be really, really important how the index now behaves. I had also suggested earlier that if the markets were going to break topside, I felt we – Australia – would lead the way. This makes the performance even more important. A lot of overhead resistance but when we consider that it has already rallied from 6400 against a background of far from encouraging outlooks, it is a really good performance.
Only another four hundred points and it will be up there knocking on the door!
View attachment 4915138When we move onto the point and figure chart (20 x 3. For people not familiar with point and figure charts, this means that the index needs to move by sixty points before reversing a trend) we see again just how far the market has already come but this chart clearly highlights the overhead resistance above current levels. However, if we can continue to consolidate in a way that keeps me happy, then I think this chart could return to the old tops. As I said above, terribly important how the market behaves now.
View attachment 4915141When we move on to the weekly chart (semi-log scale) I have drawn a red line that picks up the previous tops around 7600. But now the water becomes a bit muddier as the index would have to deal with the channel at the top of the chart. This upslanting pattern takes in all the tops since 2010 so this is going to be a difficult line to cross. However, as the chart shows, we could run through to 8000 and still be in trend.
View attachment 4915144Looking out a bit further, the next chart is the monthly high/low of XJO (semi-log scale). I have drawn a little line at 7600. If it can get above 7600 it could easily run through to 8000. If it does get to this upper level, it is likely it would spend some time in the zone. Most highs take a while to form but likely to be tough analysing again.
View attachment 4915147I will spare you the yearly chart. But I think the other charts highlight just what an important phase of the market we are entering.
Looking across the rest of my charts, there is one that I think probably carries many of the secrets – US ten-year yields. Note how it came back
beautifully to the support area marked on the chart. As I have mentioned a number of times, I think we have seen the top in rates, but I think any rallies are going to frighten the horses. I think this chart has become so important.
View attachment 4915150
(20min delay)