Archive through June 16, 2008

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ody

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Post Number: 2532
Registered: 10-2006

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Saturday, June 14, 2008 - 12:20 am:

Stronger day on Wall Street

http://money.cnn.com/2008/06/13/markets/markets_newyork/index.htm

Actually much of this news is not bad at all. Stronger consumer spending is in principle inflationary, but in a weak economy probably should be seen as a good sign if everyone worries about recessions, even if the stronger prices arise from higher costs. It is in a way reassuring if people BUY - no buying at all would be really calamitous. In some ways it would be worse if the Fed lowered rates than if it has to raise them - which COULD happen, and understandably worries people. The oil price influences the market virtually on a daily basis, of course, so we cannot take much notice of that unless at some point we know that it is definitely going down or up on a FUNDAMENTAL basis. But anyway, the mood was a little more cheerful, soon after trading started. Shan't predict what you are going to wake up to! Most of the "news" is being dealt with purely emotionally. Foreclosures were ignored for example. The market WANTED to go up for a change.

rdumas

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Post Number: 1452
Registered: 11-2006

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Saturday, June 14, 2008 - 08:28 am:

MARKET WRAP

As indicated in my post on Thursday when I bought MGX, the Materials index was reaching a critical support level(an ascending trend line within the bull channel). It turned out to be a very strong support level thus indicating once again the strength of the Materials index bull channel. Right on cue it had an almighty bounce.

As a confirming pointer the Financials index (excl. LPTs) also decided to provide a strong reversal signal.

The combination of the above two signals were a perfect setup for an upcoming rally and last nights action in the US has confirmed that indicator.

Last night the S&P500 confirmed the strength of the orange support level at 1328 by continuing its upward path from the initial bounce near that level. It closed at 1360 up around 1.5%.

On our ASX200 index as anticipated back on Thursday we bounced off a point which was very close to my orange support line at 5342 once again pointing to the strength of the area around that level. I do suspect that we will continue a small rally off that level before we continue our downward path towards the March lows.

As can be seen by my last sentence I agree with Ody about the short to medium term future however as my current strategy is for a longer term portfolio I repeat my comment that value is starting to really show itself in the market. It should be remembered that from a long term perspective we will be offered prices for top quality companies in the months ahead which will be at bargain basement prices. Naturally enough one has to be very selective about the type of companies chosen but as night follows day, the market wil eventually exceed the previous high established in November 2007. We are currently 21.5% below the November high and it will be exceeded. It is not a matter of 'if' but 'when'.

eblode

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Post Number: 796
Registered: 11-2002

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Saturday, June 14, 2008 - 09:47 am:

RUDY,
Your timing in purchasing MGX was a classic example of proper analysis of charting. Although I had purchased MGX at random times and as low as 2.90 it was done more with "gut" feeling that iron ore had to head north. Your motives were based on pure analysis of the market and that indeed is the difference between the pro and the amateur Trader. It was a beautiful play. That said,plus your encouraging prediction for the future I am delighted that you accepted my bet that the ASX 200 will reach 7000 by the 23rd of Dec.2008. I can use the extra bottle for Christmas.

Eugenio

rdumas

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Post Number: 1453
Registered: 11-2006

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Saturday, June 14, 2008 - 11:11 am:

Hi Eugenio,

Thank you for your very generous comments. I understand that studies have been carried out that women using intuition are correct in decisions on future events as often as men using pure logic. I'm not by any means saying that you are a woman (far from it) but rather saying that those with a high level of intuition can often get results that surpass those using logic alone. You did advise me privately that you had bought MGX (which preceded my purchase and at a lower price) so I take my hat off to you and your intuition.

I should make one comment about the rosy future and that is that there is a lot of water (or to be more precise, volatility) to flow before we eventually exceed the November 2007 high. As an engineer one always has to design a structure to withstand a worst case scenario even it it never eventuates. In investment terms it means that we need to be aware that a 'black swan' event is possible in the time frame that we are looking at.

For example if we get a rally for a few days and then the market drops, our ASX200 would have made a perfect 'head and shoulders' pattern which could set us up for a fall down to around 4700.

I also remind you of my post last week in which I mentioned the following:

During the March 2008 lows, the overall market PEG value got down to 1.26. Currently the overall market PEG value is 1.45. Hence there is a delta of around 13% between the current PEG value and that which existed during the overall market lows in March. If that PEG value were to be repeated, it would mean that our ASX200 would go down to around 4756 !!!!!. The other scarey thing is that the 50% Fibonacci retracement level for our previous bull market is 4760. I find the close coincidence of those facts just a little too close for comfort to totally ignore.

Whilst I consider the probability of the above scenario being quite low it is none the less a real possibility backed up by the different technical and fundamentally based explanations mentioned above. As an ex professional punter I am more than mindful of the number of 100/1 chances that win horse races each year.

paddy

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Post Number: 153
Registered: 03-2008

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Saturday, June 14, 2008 - 12:17 pm:

Rudy: Interesting that you have 4760 at 50% .

I also came up with that value but as 61.8% Fibonacci value using the 2004 Low and the 2007 High. To me that is a powerful number because below that the trend has changed and is no longer a correction .

Please correct me If I am wrong.

Regards

Paddy

rdumas

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Post Number: 1454
Registered: 11-2006

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Saturday, June 14, 2008 - 12:33 pm:

Hi Paddy,

I believe that the bull market started in March 2003 which is why I used this date as the beginning of the Fibonacci range.

I think that you will find that is why we differ in our 50% versus 61.8%. It is fascinating that both are important Fibonacci numbers. Maybe Fibonacci doesn't want us to miss that particular level regardless of where we take our base date from.

resillent1

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Post Number: 492
Registered: 10-2006

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Saturday, June 14, 2008 - 01:05 pm:

No magic in the Dow – debunking Fibonacci’s code.

http://www.cass.city.ac.uk/media/stories/resources/Magic_Numbers_in_the_Dow.pdf

paddy

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Post Number: 154
Registered: 03-2008

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Saturday, June 14, 2008 - 11:36 pm:

resillent1: thanks for the link. They made one major mistake , IMO, in assuming that determining resistance and support levels was "scientific" . In their words " no scientific rational" .

I say, if it works, don't fix it. Nothing is perfect in Life. Me I'll keep working with the supernatural or whatever.

Waiting to hear from Gann.

Have a good one

Paddy

paddy

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Post Number: 155
Registered: 03-2008

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Saturday, June 14, 2008 - 11:44 pm:

Rudy: What was the value of the XJO at start of Bull?

Must go . Think Leonardo is a'calling.

Regards,

Paddy

paddy

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Post Number: 156
Registered: 03-2008

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Sunday, June 15, 2008 - 02:38 am:

resillent1: Perhaps of interest .

Main Fibonacci ratios are:

0.382

0.500

0.618

Main Planetary Motion Ratios :

0.3877 and 0.3902

0.509

0.6151 and 0.6011

Regards,

Paddy

kate

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Post Number: 913
Registered: 04-2005

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Sunday, June 15, 2008 - 09:08 am:

Alternatively, it could all be self-fullfilling prophecy!

rdumas

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Post Number: 1455
Registered: 11-2006

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Sunday, June 15, 2008 - 10:33 am:

Hi Paddy,

The low of the ASX200 preceding the beginning of the previous bull market occurred on the 13th March 2003. On that day it closed at 2700.4 and had an intra day low of 2693.3.

rdumas

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Post Number: 1456
Registered: 11-2006

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Sunday, June 15, 2008 - 10:57 am:

Hi Kate,

By nature I am very much the engineer who requires definition and order in my universe of experience. It is for that reason that I do a lot of research both from a TA and FA perspective in my investments procedures.

Purely by a freak of nature I have had two people in my family (my cousin and her mother, the latter having passed away many years ago) who have been able to open my eyes to the world that exists beyond the physical world which is equally controlled by universal laws and order.

I must admit that whilst I have a casual interest in Fibonacci numbers and the concept of Elliot wave theory and other methodologies, I have not researched them to any degree but am willing to keep an open mind on their effectiveness. I personally use neither of these methodologies.

As I have mentioned in other posts, I am a great believer in the usefulness of levels of support and resistance whether they occur in the horizontal plane or in channels or along sloping trend lines. Whilst no system is perfect I believe that even in the last few years I have publically demonstrated their effectiveness in predicting possible outcomes. There are pretty solid psychological reasons as to why these behaviors are exhibited in market action which I won't go into in this post. I also have a 'gut' feel however that the effectiveness of these particular methodologies are actually enhanced by the 'self fulfilling prophesy' effect caused by the wide spread knowledge amongst the investing/trading community of these market actions.

We as investors need to use every tool that we have proven to ourselves as having the ability to increase the probability of a successful investment. I personally would not pooh pooh any technique that an individual investor has found that works for them. There are many pathways to heaven.

sway

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Post Number: 336
Registered: 12-2005

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Sunday, June 15, 2008 - 11:27 am:

Rudy

Despite our disagreements in the past I still look forward to reading this thread. As you know I am primarily a believer that everything you need to know can be seen in the charts. At the end of the day, I act on what is the most significant to me.

That doesn't mean I am blinkered to other points of view. At the moment I'm reading Jim Slater's "The Zulu Principle" which seems to be very much in tune with your views on fundamental analysis.

Cheers
Sway

This is not a recommendation or advice. As they say .... DYOR.