update - special report - stock market cycle, page-4

Hi Red,

Yes, I'm surprised too.

However, it's following the road-map set out by Hofschire which I showed in the original report. The four sectors which do well early in the cycle include Financials. And that's what the charts I posted earlier today are showing.

XFJ has had a bit of a bounce recently - but is still under the key 170-Day Moving Average.

Don't forget - these charts are ratio charts. The sector itself may still go up while the ratio chart goes down.

This exercise is designed to help allocate resources to the best performing sectors, and to avoid sectors which are not performing quite so well (although they could still be on the positive side).

Can you tell me why you think financials will go up 20-40%?

40% on CBA for example (the biggest component of the sector) would put the share price of CBA around $75 - that's a high target. The muted response since CBA's recent outstanding performance announcement doesn't fill me with a lot of confidence.

I know you're bullish on the market. Perhaps you could give the reasons (fundamental and technical) for such a sentiment?

Chart for CBA:



The Island Reversal was followed by a gap down on extremely high volume. That's a bearish event - and I believe changed the medium term outlook for CBA from bullish to bearish.

Today's action, so far, seems to be confirming the change in sentiment with the stock clearly breaking below the 13-Day Moving Average.

Good luck
Redb