The US market broke out of a very large reverse head and...

The US market broke out of a very large reverse head and shoulders formation last night. If it stays there, it points to very considerable upside, Dow 14500 or so.

The setup is rather poorly formed but is almost identical to the one Australia broke out of in June 04, immediate target 4270 or so. I expect the US to follow a similar pattern (rise of a few percent, pullback to the line, uninterrupted growth for a year or so).

Exactly what effect this will have on Oz markets is ambiguous. Initially it will give the XJO a fillip, but eventually it will be a drain - once the world has got over its love affair with the China resources growth story.

The negative BoP effects of an accelerated move of funds from investment houses to the US at that time (which has already been largely responsible for our bad BoP figures for the last ten years) will be partly countered by a fall in the dollar - and a rise in export earnings as the current round of materials price rises shows up in the statistics.