As highlighted many times before, but of continued interest to...

As highlighted many times before, but of continued interest to me, is the length of time the XJO has traded between the 23.6% and the 50% fib of the all-time high, (1 Nov 2007), and the March 9, 2009 low just above 3,000.

Following this low (point B on the chart), the index moved back immediately to the 23.6% fib and hit resistance 3 times before finally breaking through.

It then went directly to the 38.2% fib (no. 5 above) and broke through but failed to reach the 50% fib in October 2009.

The index retraced back to the 38.2% fib before breaking up again and finally hittng the 50% fib at no. 7 on the chart.

Between points 10-18 on the chart, the bulls and the bears battled each other between these support and resistance points, until the bears finally took control and the bourse dived back below the 23.6% fib at point 19 in August last year.

The 23.6% fib provided support and the bulls pushed the level back between the new trading levels (support 23.6%; resistance 38.2%), where it has remained ever since, until now, (point 25), where we have once again broken back above the 38.2% resistance.

So, where to now?

The bears will be looking for any sign of weakness (eg Google) to send back below 4500.

The bulls (“don’t fight the Fed” and “China soft landing”) are perhaps hoping that continued optimism could take us swiftly to back up to the 50% fib – that’s at 4,950 points (400 points or close to a 10% uplift from current levels), with not a heck of lot of resistance between the two,
(as far as I can see).

My backside is sore from sitting on the fence as I have no idea which way the chips will fall, but my small cap stocks are praying for the glass is half full brigade to come up trumps as possibly the XSO could be a big beneficiary of any rise given how they have lagged over the
Course of the past half decade.

Of course, it could all just be my wishful thinking!