spi premium , page-4

Gday Mr VeeDubya.

I would classify our current position as: within the high potential area for a correction within a bull market, according to my studies.
So let me share with you a brief history of the SPI premiums.

Chart 1: 2004 to 2008 bull market.



Here you can see the majority of the bull market, it cycled with a small range, then in 2007 the premiums started to get very excessive, which in hindsight was a precursor to the GFC. So, for a healthy market we want to see a small range in the cycle, preferrably balanced to the discount side of the cycle. Within the cycle, as the indicator turns from a bottom and heads up, its typically associated with, and often leads (ahead of time) the strongest bull markets. As it reaches a peak, then turns down, it frequently (but not always) signifies a corrective pullback is due.

I've also shown a big outlier on 17/8/2007, which is zoomed in on in chart number 2...



The outlier was nearly twice any other discount in the past 4 years. This shows how the market moving fast to an extreme one way can be an excellent reversal signal. From that signal, you could have bought on the next open, and caught an almost 1200 point rally in a bit over 2 months.

And the 3rd chart...



Shows the GFC bear market up to now. There are 2 extremes that I put a red cross on, because they were just when the ASX and SFE exchanges traded on different hours, so the comparison on those 2 days aren't valid.
The chart shows we have returned to a bull market cycle. The current cycle has come off its peak, hence I am currently looking for a downward corrective move.
I have previously mentioned the SPI Premiums are in a 6 monthly cycle, which is worth keeping in mind. We may be a couple of months off the next strong rally (post Xmas rally anyone?).