investors worry too much

Hi All ELM watchers,

For those interested; I have copied an extract from an Investment House commentary that I follow to provide an introduction and then follow up with some charts and commentary:

Should You Take Market Jitters about European Debt and a China Slowdown Seriously?

"Investors worry too much. Each spring season, as we reported recently, fears about a world economic slowdown sprout forth and bloom just like the perennials in your garden. Stocks retreat and commodities decline. In recent years, the fear has involved foreboding that one or more of the weaker countries in Europe may go bust. There is, to be sure, no doubt that several countries in Europe are haemorrhaging fiscally as a result of too many irresponsible socialist programs. However, there is also no doubt also that the more financially-robust German and French governments will infuse liquidity into the financial system to keep the economic union together as long as possible. These infusions, new loans and pump priming, are sufficient to keep the weak economies alive, but not restore them to health. More importantly, though, these infusions add to long-term inflationary effects being created in Europe that will surely have repercussions for the rest of the world.
The oft-predicted world economic decline failed to appear in 2009, 2010, and is not likely to materialize this year. Remember all the anxiety in 2009 that there would be no recovery from 2008? In 2010, fears revolved around a double-dip recession and deflation caused by Europe's money mess. Both times the pessimists were wrong. This year fear has surfaced about China not manufacturing enough goods, which, in turn, might lead to low raw material imports by China and low economic growth for the world. We believe this new variation on the fear theme will not materialize into reality."

http://www.guildinvestment.com/2011/05/26/should-you-take-market-jitters-about-european-debt-and-a-china-slowdown-seriously/

Now for the technicals in Daily, 3 Day and Weekly Time Frames:

Daily time frame:

1. A swing low has been made that is associated with a turn in my CTI - the thin blue line - ( an expression of the convergence/divergence of a ratio of 2 moving averages)

2. This swing low and the CTI turn has corresponded with a turn up in all the momentum oscillators from oversold levels.

3. The slow CTI (CTI smoothed - pink line ) and the TI (Trend Indicator - green line) have turned up confirming the turn.

4. Price has remained above the 144 day MA and volume has been rising.

This, in the daily time frame, is all good for bulls, worrisome for bears.



3 Day Time Frame:

1. A swing low has been made but not yet confirmed by the CTI turning up. Momentum indicators are turning up but not yet crossed their respective trigger lines (the same momentum indicators smoothed).

2. Price would appear to be retracing the upswing from $1.65 to $3.00, recognising the 89% last line of support of this swing.

3. Price is testing the lower limit ($2.03) of the major uptrend RC (regression channel) that began in Aug 2010 at $0.28, attempting to re enter that uptrend RC.

4. Price is also testing the upper limit ($2.13) of the minor downtrend that began at the $3.00 high when the JORC resource was announced, attempting to break out of that RC.

5. Thus, early signs of a potential turn but nothing confirmed yet. A very interesting inflexion point for price. If price can push back into the major uptrend channel, I'd expect a strong move back to at least the mid point ($2.50) and possibly the upper limit ($3.00). If price retreats from this convergence point of the two RC's we go to the lower limit of the current downtrend (test of the $1.65 swing low made in March 2011).




Weekly Time Frame:

1. Price needs to breach $2.11 to make a swing low.

2. No sign of any turn here (swing low plus CTI turn up) yet...

3. Price has tested the lower limit of the major uptrend and failed thus far.

4. Momentum oscillators are still falling, in oversold, but with no turn apparent.



The wrap up:

1. We may well be seeing a short term rally within the broader down trend, OR,

2. We may be seeing the initial indications of a significant low in the making.

3. I know, not much good for traders!

4. However, knowing that the stock is cum a raising the recent disclosed volume has tweaked my interest...

- have management arranged for CR subscribers to buy on market and then top up in the CR? If so, then bravo to them!

- has the stock price got to the point where the smart money know thinks its cheap and are happy to buy in any size off the weaker holders?

- Imo, the bidding apparent in the market is a sign that ELM, although undergoing a significant correction, is going to make a significant low from this decay phase that will set the stage for another dramatic growth phase.

Thanks for listening.