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Archive through May 28, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through May 28, 2010

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rdumas
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Post Number: 3468
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Wednesday, May 26, 2010 - 08:06 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,

One slight correction to your post above. I am not looking at the market purely in EW terms. If I was I would probably be agreeing with them. EW is great in terms of pattern but pretty lousy in terms of timing.

As indicated in my post (and you rightly mention), there are always several scenarios that need to be kept in view. It is only when more of the pattern is revealed that we know which scenarios can be invalidated. Most EW analysts because of their lack of understanding of timing have already invalidated my suggested more bullish scenario of another leg to the March 2009 rally.

This is not to say that I am right and they are wrong, it is only to say that my scenario has not yet really been invalidated using other methodologies. I'll let the market show me which scenario will play out and nothing that the market will do will catch me by surprise whereas a significant bounce would have many bearish EW analysts scratching their heads. One thing however that should be made clear. Regardless of which EW scenario we are looking at, they will ALL eventually take out the March 2009 low.

The only pattern that would not take out the March 2009 low is a contracting triangle (which I originally favoured) however if wave B (ie, the March 2009 rally leg) could not get higher than a 50% retrace of the original market plunge from November 2007, that scenario becomes highly unlikely.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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baysider
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Wednesday, May 26, 2010 - 08:21 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy
It looks to me like the S&P500 has just bounced off the 50% Fib level from the recent high to the July 8th low, the first retracement of the rally.







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rdumas
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Wednesday, May 26, 2010 - 08:41 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Baysider,

Yes and the other observation that should be made is that the S&P500 is forming a base from which to mount its next move up. It's a well established rumour that the amateurs open the market and the professionals close it. The way I look at it is that the intraday spikes indicate the degree of volatility in the market but that the close prices tell the real story about the strength or weakness in the market.




What we are seeing are the intraday spikes testing for a suitable bottom for the market move. Note the slow down in the rate of descent in the market move in terms of close prices. That is the telltale sign that the move down is losing it's sting.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Post Number: 3470
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Wednesday, May 26, 2010 - 08:48 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Eugenio,

Ahhh!!! You are a canny trader with absolutely no fear at all. I think your entry is pretty good ol' buddy. Looks like a safe trade to around the $3.00 level anyway.




Mind you, I think you would add some real spice to the local monastery.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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bridog
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Wednesday, May 26, 2010 - 09:26 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



All the stocks and indexes I watch had a down day yesterday but it was on even thinner volume than Monday's rise. Also it did not take out Fridays low.

I take this as somewhat bullish.

When I went to bed the DOW was down over 200 points, but this morning this was pared back to 23, and the S&P 500 apparently finished all square with its opening.

Somewhat bullish again.

Even amongst all the bad news, the fundamentals coming from the US are mostly positive, resource prices while not a their peak have not crashed, and some would be positive possibly even peaking in AUD terms.

Could this be the start of a relief rally?

I'll do the commodity price comparison tonight to verify or refute the above.


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ody
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Wednesday, May 26, 2010 - 10:02 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Wall Street

I would suggest that Wall Street did indeed very well to rise from its own negative start, but that (a) it even so ended weakly, and (b) we have seen such volatility before. Indeed, it seems a mark of the uncertainty of the times that we have markets starting strongly and ending weakly and vice versa.

So I am not sure that we can necessarily read a lot into this impressive one-day rise. It IS true that the US is economically, and in sentiment, doing comparatively well - though only comparatively: it is also easily shaken by developments such as those in Europe, which actually have not improved at all, and I do note that markets were extremely negative in Europe itself overnight, and have also been weak in much of Asia and South America. So although Wall Street did somewhat better than other markets, it continues to have plenty of reason for worrying further - or once again - about the rest of the world, and it will not take much for it to do so again.

Even so, I admit that that was a strong recovery, and perhaps the US will decide to "go it all alone". Personally I think it is more likely that the bulls took advantage of weak sentiment, and that it remains as yet unclear whether Wall Street will continue to go up in the days to come.

Our own market may however, going by the futures, take heart, today, from Wall Street, as it so often follows what it sees as the leader, and pays much less attendance to e.g. Europe. Even so, I think Australian investors - or, more importantly perhaps, investors in Australia - will continue to have plenty to worry about here. There has been a tendency for both Australian stocks and our currency to slip against the US.


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rdumas
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Wednesday, May 26, 2010 - 10:19 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bridog,

Timing is one of the more difficult things to do in the market because potential turn dates can slip or come early. My timing analysis has the bounce taking place in the period from the 1st June to the 4th June however coming a little early would be no great surprise.

You may recall that I expected a high to the bounce to terminate between the 24th and 27th May. As I mentioned in that post there is nothing stopping another couple of days of upward movement before the final leg down that I expected to complete between the 1st and 4th June.

If you look at the recent price action in the chart below, the latest leg down had 3 waves. I would have expected a 5 wave move. What appears to be happening is that we are still in the "bounce" phase "before the final leg down". Perhaps we may still top out in the bounce on the 27th before the final leg down terminating in early June. You can see that it is not that easy to read things because various scenarios can play out.




Regardless of what happens though it is clear to me that both in terms of timing, price and pattern, we are either near the low for this current correction or have already seen it. When factors come together like that my confidence level increases. I am not in a hurry to rush in today and will be happy to wait for my early June dates as once my expected rally comes, it will last for a number of weeks and possibly months being a higher level wave structure. It will not be a rally that fizzles out in a few days.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Wednesday, May 26, 2010 - 10:23 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi all,

Pretty bullish move starting right here. I reckon we'll be heading up to 4500-4520 area before resuming the downtrend again towards 4000 (and possibly 3600). Ride that Wave up boys and enjoy it while it lasts as this won't last long!

Cheers
MM


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peterloh
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Wednesday, May 26, 2010 - 11:01 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Bridog,Ody and Rudy

The retrace, correction will have to end some time. I normally anticipate it to be in June, but because of the volatility in May, it may end sooner than later.As I am never smart enough to buy at the bottom, a good price is what I always look for, not always the cheapest.

The goodwill of mankind and self interest alone will be a support for the market both morally and financially. We didn't think that we can reach the moon or fly in the skies, did we? It is highly unlikely that we will have a double dip. The previous one was triggered by the Leyman Bros which was a result of a very tight credit squeeze where financial institutions choose to have nothing to do with each other.I do not see this happening again.

The Korean dispute is nothing new and had been in existence for years.We had known for some time that the PIGS countries were in trouble for some time too. What is new? These countries will have to take their medicine and we will be on our way again.Of course taking medicine is never easy but it is a necessity for their own survival.

China is a member of the world community now.It holds most of the chips in the world and they know that their holdings in Europe and the US is worthless unless the world economic system continues to work. In view of the problem in Europe, they are starting to improve the liquidity in China again and news that they will continue to strive for a higher GDP to about 11% this year is good news.The so called "Ghost cities" in some secondary cities in China can be easily fixed as the government can populate them with some of the soldiers and give to them as part of the social system. In years to come, these will be the soldiers' future residence. China has a rural population of over 400 million people, so a million or two empty residences wouldn't be a problem let alone a few hundred thousand residences.I cannot imagine, anyone will want to continue building if they have no demand or anticipated demand, at least not on that scale.We are worried because we have a small population and we do not know enough about how the Chinese system work.One thing I do know is they do employ expatriates from all over the world so that thier people can learn from them and that these people can help China progress.In many ways China is even more capitalistic than the US.

The US was the first country that went into recession and is the first to come out of of it.It has the biggest economy in the world. Together with China, they will lead the world out of recession.

Locally, we are not that dependent on the European economy any more. Our export to Thailand alone is more that the total of Germany and France.The Asian countries which are doing well currently are our biggest market.The earlier we can shelved the proposed RSPT and think of an alternative plan to fix the country's deficit or even reduce some of the proposed spending, the sooner we will get the overseas investors back to Australia and our miners to continue to do what they do best and that is to do most of their mining in Australia. In turn we will have more taxes because of the increased in mining activities.

I have been told not to buy on the dip as we can buy it cheaper the next day. I run a portfolio of shares and is not able to buy the cheapest every time.I am contended if I can buy at a low price and sell at a high price, not necessary the top. Yes I have been buying on the dip. I must admit there is always never enough paper to do it.

cheers

Peter


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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rdumas
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Wednesday, May 26, 2010 - 11:12 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Giving some perspective on the Correction

There is no doubt that it has been a reasonable sort of a correction to date. Taking the emotion out of it is what I prefer to do by looking at the facts of the drop in terms of the bear market rally that started in March 2009.

I will look mainly at our two largest sectors in this post. The thing that we should always keep in mind from a technical perspective is the strength of trend. Simply speaking a retracement of around 50% is fairly "neutral" from a trend strength perspective. Obviously the less the retrace, the greater the trend strength and vice versa. Clearly from a higher level perspective, the true test of a 'change in trend' is when the previous low of the higher level pattern has been taken out. Until that time, the trend remains in place regardless of the fundamentals or the depth of any retrace.

Let's first look at our Financials excl. LPTs sector and how it has performed in terms of the retrace relative to the March 2009 rally leg. It can be clearly seen that this sector tested the 38.2% Fibonacci level but was to this point in time unable to close below it.



Now it is true that from a larger pattern perspective, this is only the first leg in the pattern and we may see a rally of higher order and then continue down in the following leg. In fact it can be seen from the shape of the move down that it was a 5 wave move down which could indicate that it is an impulse wave and hence warns of an even larger move down once the rally leg is over.

One of the traps in EW analysis is that many analysts automatically feel that a 5 wave move with non overlapping legs is "always" and impulse wave. This in fact is not correct as there are corrective patterns that do have non overlapping 5 wave structures.

If the pattern is an impulse wave then there will be a higher order rally from somewhere around this level before the next leg heads down. If the pattern is a corrective wave then there will also be a higher order rally. The only difference in outcomes between the two patterns is the length of time that the rally continues. For shorter term investors once the upcoming rally commences it will provide an opportunity to make some money.

Money is not made on the long side of the market by purely studying fundamentals in isolation to the technicals of the market moves. Money is made on the market by recognising when higher order rally waves are in play regardless of whether they are bull or bear market rallies. Let me show for example two such higher order rally legs in this bear market.




Note that the first higher order rally leg in this bear market recovered 50% of the previous down leg.

Note that the latest higher order rally leg in this bear market recovered more than 61.8% of the previous down leg.

Now looking at the Materials sector (XMJ). We can clearly see from the chart below that this sector was marginally stronger than the Financials sector.



Now I should point out that the rally that I am expecting (whether it be a rally within a higher order impulse wave or a higher order corrective pattern) should be seen in the context of the move down that started on the 15th April and not in the context of the complete bear market pattern. It none the less will be a rally that will give us medium term investors a chance to make some money for the duration of the rally over a period of weeks rather than days.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Wednesday, May 26, 2010 - 11:55 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy, -

I accept that it is perfectly possible for the move down from 15 April to have finished - or about to finish - so that some sort of rally can follow. There would be nothing abnormal in this.

What I am uncertain about it not that possibility, but the duration and level of such a rally. Currently I am most inclined towards MM's view that something like 4500 might well be possible before the market falls again.

I am not dogmatic on the issue, though, and I quite agree that it is at any time possible - sometimes even for a long period - for share markets to override any fundamental considerations. Indeed, if I did not believe that I would not twice have made good money exactly on the basis of that premise.

What rather worries me at present, though, is that the fundamentals are remarkably bad, very much in the public eye, and have been a potent influence on market conduct. Nevertheless, markets may well feel that the fall has been big enough, and thus rally. I keep an open mind - one really has to, in share markets!

Here is one of the more negative assessments I have read this morning, and - even if only because so many posts are suddenly so bullish! - I shall present the odd contrary opinion like this:
------------------------------
Robert Gottliebsen (from Business Spectator)

Just days from a market rout

Global stock markets are sending the world a simple message which is available for all those who care to listen. The biggest question is whether the turmoil will have a marked influence on world business and consumer confidence and therefore the global economy. And if the globe slows, Australia faces a double blow.

The simple message is that markets have grave doubts that the European rescue package will work because there is too much debt to fund. In other words, the mess that Greece, Spain, Italy, Ireland and Portugal are in is too big to be rescued – they will bring down the rescuer.

And forcing these countries into deep recessions as part of the 'rescue' will also drag Europe down and make the rescue even harder. Adding power to the doubts is the decision to curb shorting activities, indicating to the market that Europe is concealing deep problems.

Not everyone agrees that the market message is correct and many have great confidence in the European package. But as I pointed out yesterday (see Fear rises in interbank lending, May 25) the doubts are affecting the interbank lending rate, which edged higher again last night. It was the 11th straight day the rate had been lifted as banks realise that many of their number might be endangered if the market is right.

If that keeps happening then we will see a tightening of bank lending around the world and the looming European recession will affect every part of the globe.

It is this force that initially is depressing commodities. Last night fears of the Korean crisis deepening and involving China, plus, of course, the China slowdown fears, also affected the commodity markets.

If the trends we are seeing in the markets continue for much longer, it is going to affect the global recovery.

The next few weeks will be vital. Last night the Dow index of US shares ploughed through its so called 10,000 resistance level as though it did not exist and at one point the Dow was as low as 9774 – a fall of about 2.8 per cent. But then it began to climb and finally closed above the crucial 10,000 level sending out a great cheer among US traders. It will boost our markets this morning.

But if the Dow falls below 10,000 again – and stays there – it will trigger large selling waves from the charting community who will then post 8,200 as the next resistance point. I get regular emails from chartists including the Futures 618 group warning me we will again test the lows of last year and that we are experiencing a gigantic bear market rally.

Only a small minority of people believe this, but if the Dow stays below 10,000, those that have that bearish view will multiply.

So, in short, if the current stock market trends are not reversed in the next few weeks, the stock markets will indeed begin to affect confidence and trading in the global community. Australia is in the front line.

Of course, as only Australia can, we have shot ourselves in the foot with the mining tax which has triggered a capital strike that will delay over $100 billion worth of new projects. So, if the global markets signal converts to a slowdown, then we face a double blow. That’s why our currency is being hammered and our stock markets are performing so badly.


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ody
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Wednesday, May 26, 2010 - 11:58 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



And another negative view, also from Business Spectator:

Alan Kohler

An urgent 'sell' warning

Richard Russell, author of the famous Dow Theory Letters, is “insisting, demanding, begging” his subscribers to “get out of stocks”.

In his latest letter, published last night, he says the stockmarket has lost its mind. “Finally it’s happening. The poor thing is falling apart.” Russell is referring to the fact that the market is falling in the face of persistent optimism about the US economy. He says you should believe the market, not the economists.

“It’s been hard, and it’s hard to tell my subscribers that this market is topping out and that you should be out of stocks. So, if you are still in the market, sell your common stocks (not the golds) and get out. I don’t care how good or how blue-chip your stocks are, when the bear takes over, he sinks his claws into the throats of all the boys and girls. Declining price/earnings in the bear market alone will cost you, and P/E ratios are now dangerously over 20.”

He says the breakdown in the Google, Apple and Berkshire Hathaway share prices on heavy volume, as well as the downward slope of commodity prices, shows that the market does not believe the positive economic news in the US.

Richard Russell has been publishing his Dow Theory Letters for 52 years. Early on, he called the top of the 49-66 bull market, and the bottom of the 72-74 bear market almost to the day.

The 'Dow Theory' is a form of technical analysis that was developed by Charles H Dow in editorials he wrote for the Wall Street Journal in the late 19th century. After Dow’s death in 1902, the editorials were collected and organised as 'Dow Theory', even though he never used that term or presented it as a coherent theory.

The theory asserts that market trends have three phases – accumulation phase, when smarties get in; the participation phase, when everyone else gets in and rampant speculation occurs; and the distribution phase, when the astute investors 'distribute' their holdings to the market. Other tenets of the theory are that the Dow Jones average and the Transportation Average must confirm each other, that trends are confirmed by volume, that the stockmarket discounts all news (a bit like the efficient markets hypothesis), and that trends exist until definitive signals prove they have ended.

In this morning’s letter, Richard Russell says he has only once before seen the stockmarket ignored the way it’s being ignored now – in 1958.

“The nation was in a deep recession, and investors were black-bearish on business and the economy. Many talked about 'a return of the Great Depression.' Others swore they’d 'never buy a stock again.' The Dow hit a low in late-October at 419.79 (I’ll never forget that number)..." At that point the 'Rails' (the railway average) kept falling. It was a 'non-confirmation'.

“I turned very bullish, and I loaded up with stocks, using every single dollar I owned.

“The stock market turned up in early-1958, and it just kept climbing in the face of the deep recession. People actually got angry at the stock market. Investors were calling Wall Street “out of its bloody mind,” and that “this was the time to put out shorts.” As the year 1958 moved along business started to improve, and by 1959 business was booming.”

Of the current market, Russell says: “In 50 years, this is the most decisive top I can ever remember... the damage and the cost of this reversal will run into the trillions of dollars.”

It’s true that the official line in the US is that the economy is continuing its robust recovery and that a double-dip recession is not in prospect.

Last night, for example, the President of the Federal Reserve Bank of St Louis, and voting member of the Fed Board of Governors, James Bullard, said the problems in Europe are unlikely to send the world back into recession, and might even benefit the US.

“There is nothing intrinsic about such crises that they need to become important shocks to the broader, global macroeconomy. Countries do default or restructure their debt from time to time, and the world goes on.”

Richard Russell says: “I trust the stock market more. If I read the stock market correctly, it’s telling me that there is a surprise ahead. And that surprise will be a reversal to the downside for the economy, plus a collection of other troubles ahead.”


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ken
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Wednesday, May 26, 2010 - 01:34 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy,

Looking at your double tops in XMJ and XXJ set me wondering what was responsible for the wider market having a higher peak in April than January. I found that XUJ (utilities) was higher in April, as was XDJ (discretionary) and XHJ (health).

Then the waveform intrigued me on XXJ - the recent fall is so much angrier, which suggests a wave 3. Is it possible to make a case for the October peak being the end of the bear market rally in XXJ, the late November trough being wave 1 down, and the April peak being wave 2 up, hence we have entered wave 3?


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ody
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Wednesday, May 26, 2010 - 05:31 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Somewhat lopsided market

The market did go up, but not as persuasively as during part of the day it seemed it would. Still, the percentage was substantial. A real oddity - and something that does not augur well, to my mind - was that strength was significantly concentrated in the following sectors: energy 1.9%, gold 2.5%, and metals and mining 3.1%. These sectors really stood out markedly. Up volume was decent at 1,201,174,635 out of total which was not big but not trivial either: 2,2069,964,294 (note: these figures are possibly still subject to adjustment, for this message is written not that long after the market closed).

With so strong a concentration on, in essence, mineral resources, the market was and is vulnerable in other sectors. Banks, for example, did not "fail", but were weak. If we are to have a rally that will stretch over several weeks it will be important to have the resources up to a less extreme extent, and banks up more.

The losses in utilities, property trusts and health are not so much important per se but a further indication that people were absolutely hell-bent on buying resources. This was probably in part prompted by a number of speculative factors - e.g. the sense that the tax issue will not impede resources for ever, that "a compromise will be reached", that the stocks are "too cheap", etc. It is difficult to make the case that the buying rested on new strong fundamental reasons, but that is probably not what the bulls were concerned with.

Disconcertingly for all but resources bulls, perhaps, was the fact that actually more stocks on the market went down than up (522 vs 510). And various stocks are STILL sold off aggressively, in that only 6 reached new highs, while as many as 53 reached new lows.

To someone like myself the market continues to look far from attractive, as very largely one would have to be a resources buff with courage if one is to see one's money go up, on a day like this. I'd like the market to be more wide-ranging, and less "hot" in the resources area, particularly at a time that remains in many ways quite dangerous to one's finances.

The interest in gold mines did not worry me, however: it supports my confidence in gold as a metal, as usually gold stocks are bought by people who look for bigger gains than the metal can provide but who would not buy if they didn't have faith in the metal to begin with. Those who do have that faith are not usually altogether convinced of the health of the wider economy. And their buying will hardly harm ETF GOLD, in any case (except if they get REALLY carried away!). So far my ETF gold has overall been a very attractive holding.


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peterloh
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Wednesday, May 26, 2010 - 05:58 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,

Good analysis and observation. May I add, that I have elected equities over fixed interest or bonds is the total return that I expect to receive for the future. It is income( franked dividends) and capital growth in the long term.Of course bonds especially good corporate bonds could not be ignored totally, as a degree of diversification and it is important for asset allocation. Everyone's situation is different.You obviously have given a lot of thoughts in your analysis.

I have not time perfectly as I believed that in the longer time a bit of price different is not all that important.
Of course it is always good to get things that we want at the cheapest price possible.

Cheers

Peter


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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jaded
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Wednesday, May 26, 2010 - 06:53 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,
At the 'butt'/Mid Cap and below of the Materials Sector,I have made the following Observations-

Basically Short Term 3/5 day/ even Intra Day Plays dominate.

10% in 2/3 days is happening.I see any 'significant' Rise[8%+] is Sold into.

BUT one has to be able to Market Depth one's transactions especially if you aren't able to 'nurse' your trades ie be ON the computer all day watching them.

So this site is actually much more dedicated to EOD trading and the current Market in Materials is NOT 'playing' to the EOD'ers[End of Day decision makers].
EG there is NO Rising Three [3] "Games".

Ody,it's Cut Throat and they who can not watch all day every day?well,my suggestion is to Buy and then place an Ask ASAP on the Depth Board hoping you'll get a 'reasonable' TakeOut.

Personally I think the 'Specialist' Materials in Coal and Iron Ore are worth 'Watching'[COK,GRR,BTV even IFE].

NHC with the Qld Gov't Sell Off of Railways is still 'watchable'

BUT the problem is that one must commit to a Price RANGE for Accumulation.a 10-15% 'Loss' potential from one's First Purchase.

Me?My parcel size is 'insignificant' compared to say,you Ody.
I can 'afford' to wait for Confirmation ie not buy d'Bottom.
Also 'happily' 3 days of the Week I can monitor intra day Action.

Anyhow,IF one has Never or Not Much been involved in the Share Market at the moment?

I'm trying to give ya d'Word..Hold OFF not Hold.

regards.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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ody
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jaded

Always a pleasure to hear from you - very informative. Next to gold (which I know you don't like) I'd probably rather have coal and iron than most things - but it requires more skill and bravery than I can muster, certainly in this "wild" sort of market, on which we seem to have a similar outlook. Yes - one can make profits but it is for the very, very wary and well-organised.

PS - It does seem, though, as markets are definitely going up, worldwide, or at least most of them.

(Message edited by Ody on May 26, 2010)


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rdumas
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Hi Ken,

Re your comment :Then the waveform intrigued me on XXJ - the recent fall is so much angrier, which suggests a wave 3. Is it possible to make a case for the October peak being the end of the bear market rally in XXJ, the late November trough being wave 1 down, and the April peak being wave 2 up, hence we have entered wave 3?




The chart above covers the period you mention.

There is no way possible of making a case for the move from late november being a wave one because it doesn't even come close to being either an impulse wave or a leading diagonal which it would have to be to be a wave 1.

The only waves that look even close to being impulsive are the waves moving up to the top on the 16th April and the move down from that top to the low on the 21st May.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ken
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Rudy,

That surprises me without doing a lot of intraday examination. Surely an impulse doesn't have to be continuous 2% plus daily moves.

The move down from October to November has a small wave 1 and wave 2, a strong 7 day wave 3, a strong wave 4 back up again (which admittedly doesn't look corrective but they often don't at lower levels without intraday data) and a continuous downward wave 5 into the bottom.

Wave 4 doesn't overlap wave 1, and wave 3 is not the shortest.

If Elliott wave theory is harder to use than that then its probably not worth the effort.

(Edit) I think you misunderstood what I said wave 1 was, as you have commented on the period starting late November which I said was wave 2.

(Message edited by ken on May 26, 2010)


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rdumas
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Hi Ken,

I think that I may have mistook the particular waves that you were talking about. Does the following chart and count reflect what you meant?

If it does reflect your thoughts then the count does appear to be valid (just).




I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ken
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Rudy,

Yes, that's what I mean.

Ken


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rdumas
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Hi Ken,

Great. I now see what it was that you were saying. As you see I cannot see any fault with that. It ties in with what I see happening on the XJO where I believe we are still in a wave 4 and still have to make a wave 5 which is why I thought that we still had a little bit to go down before we get my anticipated higher level wave rally which in the XXJ would be a an ABC corrective move up.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ken
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Hi Rudy,

Glad I passed.

Now the big question - can that interpretation be stretched to cover XAO and XJO, or are we only talking financials having this pattern? It doesn't look to fit the XMJ.

Have the Musketeers looked at this interpretation?

Interested in your comments - doesn't have to be tonight.

Ken


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ody
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Wednesday, May 26, 2010 - 11:31 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Stocks in Europe very strong
Commodities clearly gaining

There is certainly a retracement occurring right now, and it is a reasonable assumption that it will continue overnight.


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ody
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Karen Maley about how the "super tax" plan might be addressed

She is a very good and sensible commentator. Also very clear on the intricate structural problems. This is worth reading.
------------------------------------------
2:11 PM, 26 May 2010

Karen Maley (Business Spectator)

Labor's battle royal


When Kevin Rudd won power in 2007, some senior government members privately wondered whether we might see a replay of 1929 when the Scullin Labor government gained power just as the great depression was engulfing the developed world.

The worry was that Rudd, like Scullin before him, might end up leading a one-term government because he’d won power at precisely the wrong time. Australia’s stellar economic performance in the wake of the financial crisis put that fear to rest. But events in recent weeks have given Labor reason to fear a different historic parallel: the vitriolic fight between Ben Chifley and the banks.

It’s now clear the big mining companies are gearing up to launch one of the most ferocious challenges to an elected government’s policies since the country’s banks mobilised a massive campaign against Prime Minister Ben Chifley‘s plans for bank nationalisation. And, as Rudd would be well aware, the banks won that battle hands down, with the Labor government suffering a thrashing at the 1949 election.

Now the threat to the miners from the resource super profits tax is nothing like the threat that nationalisation was to the banks. The private sector banks had every right to strenuously resist being nationalised, but it’s impossible for the miners to argue that they should not be required to share some of the benefits of the biggest surge in commodity prices in fifty years with the actual owners of the minerals – the Australian public. And the miners themselves must have expected that sooner or later someone would tap them on the shoulder and ask them to hand over some of their windfall profits.

Still, that hasn’t stopped the miners from running an extreme scare-campaign against the tax, claiming that investment in the industry will plummet, and proposed new mining projects will be pulled. Rio Tinto boss, Tom Albanese, went so far as to claim that, as a result of the tax, Australia now poses a greater sovereign risk than any other country where the mining giant operates. What’s more, the mining industry is likely to act on its rage by pouring millions of dollars into depleted Liberal Party coffers, which will undoubtedly boost Tony Abbott’s chances at the next election.

The government’s initial response has been combative. It’s accused the mining industry of paying less than its fair share of tax, and has lambasted the mining industry for misrepresenting the impact of the tax. But it’s not in Rudd’s interests to prolong the battle. Instead, he should be moving to defuse the hostility by engaging in a more reasoned debate with the miners.

To start with, the government could acknowledge that it made a huge mistake in not consulting with the mining industry much more broadly before the tax was introduced. What’s more, he could acknowledge that – while Treasury boss Ken Henry has come up with an ingenious design for the resources super profits tax – there is one serious problem with the scheme about which the miners can legitimately complain.

Now, there’s a lot to be said for Henry’s approach to the resources tax. Instead of having a tax which kicks in once profits h-t a certain level, Henry is proposing something along the lines of a 60/40 joint venture arrangement between the mining company and the Australian public (through the government) that actually owns the resources. As junior partners, we don’t have any say in which projects go ahead or how they’re managed, but we do share in the risks and the rewards of the project. We get 40 per cent of the profits of the project, but we do have to dig into our pockets to meet our share – 40 per cent – of the costs of the mining project.

Not surprisingly, the government doesn’t want to hand over its 40 per cent share of the costs of the project to the miner in cash. Instead, it wants to defer making its contribution until the project is profitable. This means the mining company has to carry the government’s share of the project’s costs, on the understanding that the government will pay it back in future.

Now, the mining company might have to wait some time before the mine becomes profitable, and it is able to recoup the government’s share of the costs, so it’s only fair that it should get some form of interest payment in the meantime. Henry argues that since the mining company is effectively lending to the government, the compensation should be the normal rate of interest that the government pays on its borrowings – that is, the long-term bond yield.

But this is an extremely dubious assumption. The miner will have to go out and borrow to cover the government’s share of the costs of the project. If the mining company funds this shortfall from its general funding pool – from, say, bank loans, or the proceeds of corporate bond issues – then the miner is bound to be paying a higher interest rate than the long term government bond yield.

Even if the miner could somehow contrive to borrow directly against the expected government credit any banker would charge the miner a fee to compensate for the effort it took to ascertain that the transaction’s underlying credit risk was actually government risk.

Professor Ross Garnaut pointed to this problem in the design in Henry’s resource super profit tax in a speech last week. He pointed out that Henry’s model assumed a highly competitive financial system, with zero transactions costs and perfect information. “Is it really the case that, with all their imperfections, Australia’s financial institutions will fund delayed credits at the Commonwealth’s borrowing rate?” he queried.

It’s a very serious question, which demands closer scrutiny. And for this to happen, both the Rudd government and the miners put an end to the hostilities, and commence negotiations over how to sensibly distribute both the rewards, and the risks, of the resources boom.


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ody
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The Australian (always the most up-to-the-minute and best-informed):

Rudd beginning to concede ground to the miners, but by no means out of the wood yet, as far as I can see. It's perhaps the beginning of the end; but he'll need to do a fair bit more yet. His risk of stubbornness (not "giving in") is, in fact, electorally far more dangerous than any risk formed by true consultation and an ability to reach a compromise. If no compromise is reached the miners and Abbott will make mincemeat of Rudd. If he manages to reach agreement, this would leave Abbott in a far less dangerous position: politically, it is ESSENTIAL for Rudd to get the miners sufficiently on side. It is a failure of political nous - and a sign of his cowardice - that he so far has been merely on his high horse, without any willigness to negotiate.
--------------------------------------------
Kevin Rudd to backflip on mining tax rate

* Dennis Shanahan, Political editor
* From: The Australian
* May 27, 2010 12:00AM

THE Rudd government is moving towards a major backdown on its $12 billion tax on resources, redefining its proposed super-profits levy, but the big mining companies have declared the changes do not stop the risk to investment in Australia.

Only three weeks after unveiling the new resource super-profits tax, the government is preparing to lift the threshold definition of a super profit from 6 per cent to 11 or 12 per cent following a ferocious campaign by the mining companies.

To offset the lost revenue in raising the threshold to the same level as the existing petroleum resources rent tax, which applies to offshore gasfields, the government intends to withdraw the 40 per cent taxpayer-funded compensation originally offered for mining projects that fail.

But all the major mining companies have rejected the new proposals as "tinkering at the edges" and not addressing the main risk to mining investment in Australia. The mining companies are demanding more negotiation with the government on the issues of the retrospective application of the new tax, different rates for different minerals and the 40 per cent tax rate.

BHP Billiton chief executive Marius Kloppers declared last night that any thought the petroleum tax would work for minerals was "naive" and demonstrated "a lack of knowledge as to how investments are made".

"Most importantly, we must understand that for each mineral we are competing against other investment destinations, and each set of minerals has a different set of competitors and those competitors set the price," Mr Kloppers told The Australian.

And Xstrata chief executive Mick Davis said from South Africa: "The government needs to do what it should have done all along and enter into full and open consultations with the industry where every aspect of the super tax is open for debate. Tinkering at the margins will not avoid the significant long-term damage this tax could do to mining investment in Australia.

"The government should stop negotiating with itself and start consulting with the industry."

Rio Tinto chairman Jan du Plessis told the company's shareholders that Australia's reputation had already been damaged by the super-profits tax proposal.

"We are concerned that the proposed resources super tax will erode Australia's competitiveness, severely curtail investment and limit jobs growth," Mr du Plessis said yesterday. He said that some of the government's arguments for the tax and some of the statistics that had been produced to support them "could only be described as scandalous, totally scandalous".

Wayne Swan continued his criticisms of the mining companies yesterday, telling parliament they were still paying only 17c in the dollar in tax compared with the "headline rate" of 30 per cent. The Treasurer vowed to keep the 40 per cent rate for the new RSPT.

"What we have to do is extract the maximum value for the Australian people as we go forward to reform our economy, to invest in our economy and to ensure our prosperity as we go forward," Mr Swan said.

Earlier, he said the government was "interested and fair dinkum about consultation".

"The government is involved in consultation," Mr Swan said. "First of all, we have our consultation panel. Over 80 companies have been through that panel process and are talking to that panel. In addition to that, the government is continuing to talk to many mining companies about their views.

"What we are going to get for the Australian people is a fair share of the resources they own 100 per cent, a fair share - a tax which encourages investment and growth in the industry."

The government's consultation panel, headed by Treasury deputy secretary David Parker, will give its first report to the government tomorrow. It is expected to go beyond its strict limits for discussion and recommend the raising of the threshold for the super-profits tax to be lifted from 6 per cent, the long-term government bond rate, to about 11 or 12 per cent, the bond rate plus five or six percentage points.

As reported in The Australian on Monday, the lost revenue would be covered by the withdrawal of the 40 per cent compensation for failed projects to enable the government to keep its budget projections, including a $1bn surplus in 2012-13, intact.

Mr Parker said yesterday the proposed RSPT as a result of the Henry tax review was "the architecture of reform, not the engineering drawings".

"With such reforms, there will always be winners and losers, with some groups more vocal than others," Mr Parker said. "The challenge is to work together to address the issues that will inevitably arise."

Government sources confirmed that the panel was expected to recommend major changes to the proposed RSPT, including raising the threshold, but others warned it was unlikely there would be an early settlement of the negotiations with the mining companies.

In Adelaide, Mr Kloppers said a 40 per cent tax rate may have been considered appropriate when it was devised for the petroleum industry in the 1980s after two years of consultation but it was "a giant, naive extrapolation to think miraculously the same one is the appropriate rate for every mineral in 2010".

"BHP Billiton, being in the oil and gas industry and in the minerals industry, has experience on both sides and, more than other players, we understand the difference between the products themselves and between minerals more broadly," he said.

"Retrospectivity on this tax is the key determinant for Australia as a destination for investment.

"It goes against the core offering that Australia has, which is being a stable place for investment."


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rdumas
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Thursday, May 27, 2010 - 08:07 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ken,

The XJO (which is the index I focus on and is not too different to the pattern of the XAO in overall pattern anyway) has a different pattern to that of the XXJ.

If you look at my post 3466 to Bridog on the 25th May you will note that I was indicating the very real possibility of the move down from the 15th April being an impulse wave and that we were in the middle of the formation of wave 4 which is why I believe we are still yet to complete a 5th wave down.

This is where EW analysis can lead to a lot of confusion and why you must include other methodologies to come to a better conclusion about possible future action. I have already mentioned in past posts what the implications would be if the move down from the 15th April was an impulse wave but those implications were based on the assumption that the impulse wave was the first wave in a pattern.

As you know impulse waves are also the final wave in an ABC corrective pattern as well. So for the XJO we could have started an ABC corrective move from the 11th January (wave A completing on the 9th February) completed wave B on the 15th April and are now in wave C (soon to be completed). The implication here would be that we would then move into another significant rally possibly (but not necessarily) taking out the market high set on the 15th April to complete the higher level multi-month corrective pattern rally which started in March 2009.

Now you will note that I have continually suggested in my posts that my preferred scenario is that we will have another leg up to complete the multi-month rally that started in March 2009. The ABC corrective move detailed above fits with that scenario. My preference towards this scenario is because if fits best with what EW analysis and a number of other methodologies are telling me. Technical analysis is not perfect but we must use what ever tools we have to make come to our conclusions and the more methodologies that we use the better our conclusions should be.

As I have also said many times in the past, I am not married to any single scenario but am acutely aware of the possibilities of each scenario and look for the signs to either validate of invalidate each case. This once again reinforces my contention that regardless of which scenario I look at (whether bullish or bearish) in my view there is definitely a higher order rally about to begin.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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baysider
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Hi Rudy

If you're right and there is a rally we could see a really nice head and shoulders form for the S&P500. We already have a nice right shoulder and head. Maybe 1150 could, be a good target, what do you think? Hard at the moment to see it making new highs but then sentiment does change quickly.


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rdumas
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Hi Baysider,

It is obvious from the chart below where the overhead resistance is on the S&P500. The index looks to me like it may be getting ready to attack that overhead resistance in the very near future. I expect it to be successful. If it is, expect an attack on the 'gap'.




I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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baysider
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Just read Aitken's excellent morning note - MM have you time to comment as I think you also get it?
He has the same view as you Rudy that a contrarian rebound could well happen shortly. A lot of bad news already factored in. Maybe Rudd compromise on tax or Telstra NBN could be a catalyst to release support.

Have to go now, have a good day all.


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ody
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Contrarian rebound

I think there IS a contrarian rebound occurring, but it is limited, in essence, to energy and resources. Most other sectors are otherwise not doing well enough to cause a true rally. For the market to really rally up, it would need to be far more broadly based. Or, if it is not, the resources sector would cause the rally in effect all on its own, which would mean very rapid increase in risk.

Of course, for those interested just in resources, they can play that sector separately (along with energy). But I am talking about those who might want to buy the market as a whole.


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ody
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A resources tax compromise and its effect

IF a compromise is reached and it looks at all impressive, the market for resources would rally the harder, in that area. It is very possible that the current resources rally - even here in Australia - is in part based on that assumption.

Worldwide, resources are being bought as people have (wrongly) persuaded themselves that news from Europe surely cannot get worse, and that we have a "pause" in bad news: also, that markets have already fallen far enough on the bad news that has appeared. As well, they are hoping that China will not cause too much of a problem. The MAIN driver, I think, is simply that prices had fallen quite a bit. But any positive news such as a compromise on the RSPT would definitely push prices for Australian resources companies up, if the compromise were judged to help our resources companies. I think a compromise may well come about, but there is still some distance to go. For example, merely raising the tax-exempt level from 6% to 11% would not do it, though it'd be a help.


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ken
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Thursday, May 27, 2010 - 02:38 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hello all,

XJO seems to be making a symmetrical triangle - will it break up or down?

-

Rudy, does downwards favour your bottom in early June?

Ken


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rdumas
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Hi Ken,

I suspect that it will break up to between 4460 and 4500 with a possible pit stop at 4400.

I put 20% of my spare cash into STW at the low today in anticipation of the above move.

If you look at the chart below of the XJO you will see 2 bubbles. Now one has to decide if the bubbles contain impulsive waves or corrective waves. The personality of the waves certainly reflect an impulsive nature about them however one should always keep their minds open to an incorrect classification.




If the waves are both impulsive then it can mean one of two things.

1) we have completed 3 waves of a large impulse wave down and are now in wave 4.

2) we have completed 3 waves of an ABC Zigzag corrective pattern.

Much depends on how we identify bubble 2 because one could see that as a 7 wave pattern (ie, corrective) or a 9 wave pattern (ie, impulsive). If it is impulsive then scenarios 1) and 2) apply. In both cases there would be a rally.

If it is corrective then the overall pattern of the corrective pattern in bubble would be incomplete and would go down further after a small rally.

So in summary Ken, It is possible that my friendly musketeer Andrew may be right and we may have had the June 1~4 bounce a little early.

Either way I am happy to take a punt because I believe that the downside would be limited whereas the upside has more scope. Hence my entry into the market today.

By the way, I should give a warning to holders of ETF GOLD. If a rally in the XJO (and other global indices) did take hold then we would get a pretty significant drop in the ETF.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Thursday, May 27, 2010 - 03:50 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy, - ETF GOLD

Frankly, I think worries about ETF GOLD, if they have any validity, would do so only from a short term/trading point of view. The price always goes up and down somewhat, but overall the prospects for gold remain, at least for the medium term, very good indeed. I remember your warning about this before, and going in and out, but I have no regrets at all that I stayed put.

Sure, at the moment ETG GOLD is 0.08% down, on what is a very powerful rise - of more than one day, too! - in the area of base metals etc., but I think this slight loss is trivial. Crucially, financials, though now strengthening a little, remain a good deal weaker than resources. The evidence is that people do continue to invest in gold - in large quantities, even coins - as they have no confidence in the value of MONEY, and of most assets that are conventionally supposed to be worth money or to gain it for one.

The speculation in other resources, too, is in part motivated, and has been for a considerable time, by fear that money will continue to lose its value: that view is correct, as more and more has been printed and financial problems, including the risk of sovereign default in more than one country, remain huge and very real.

So it is very doubtful that there will be any significant shedding of gold, worldwide. Rather, this has continued to hold value in recent times even while markets went up, e.g. during the first few months of this year: while gold often stood still during that speculative bull phase, or slightly went down, it never performed badly. For that to happen we would need a very different climate.

Currently (latest figures I can see) there are 3 market leaders on our market, viz. metals and mining +2.9% (this is where almost all the "real" action is concentrated), supported also by energy at 2.1%, and gold 1.6%. Yes, gold may be weakening a little, but there is not much cause for concern. That 1.6% for gold mines would not exist if people's faith were shattered. In many ways gold is not so much an investment for ever, or, on the other hand, just for a few weeks, but for a period when people fear that the value of most assets, and particularly currencies, run the risk of getting devalued. We are certainly in just such a period, and not yet coming out of it. Nor is it likely that that will happen for quite some time.

Indeed, I overnight read an interesting argument (I'll see whether I can find it back) which showed that there is a good chance that gold is actually still only at the beginning of a huge rise, if historical comparisons count for anything. Of course, there is always a speculative element about gold, as there is little you can do with it, but it is much desired during certain times of crisis like the present. And with Europe the way it is, it would be very unwise to believe we are not in a crisis. Gold's value would, I agree, drop if we were facing a HUGE bear rally, such as we had from March 2009, but I think we agree we are very unlikely to see that. And even then, we also agree that a fall would still remain inevitable, so that "gold would come back".


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rdumas
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Thursday, May 27, 2010 - 04:24 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,

I have always held the view that the longer term target for the POG is $1325 or thereabouts. I have not changed my mind about that particular target.

Unfortunately the POG is not the only influencing factor in the ETF GOLD. The other main contributor is the AUDUSD which if a significant rally takes place in the XJO will follow the index up.

There is no doubt that earlier I did expect a larger retrace in the ETF GOLD than which actually occurred. I have no problems with that minor error in expectation. One must however be aware that there are sub wave retracements and higher level retracements. What is quickly coming upon us is a higher level retracement. This will not be a retracement of a few days but rather one of a few weeks. Higher level wave structures are larger and take longer to form.

Like you I am fairly confident that the ETF GOLD will reach new heights once my expected rally in the XJO completes. I will be attempting to make my money riding up that wave rather than watching another stock heading south.

Now I am not suggesting with a 100% certainty that my anticipated bounce in the period from the 1st ~ 4th June has already occurred but there is a possibility that it may have. What ever happens I am happy to start putting my money back into the market for this rally.

Do not be fooled by the fact that the rally may not start as a broad based rally in the beginning. If things play out as I expect then the other sectors will join the party.

We can see from the XMJ that it has obviously been a leader in the move up in the market today.





What is also clear however is that the XXJ has also put in a strong foundation upon which to build into a rally if warranted.




I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Thursday, May 27, 2010 - 05:21 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy,

I see the reasoning, and you may well be right. As far as the present rallying is concerned, it is obviously very strong right now, with a lot of momentum for resources. I am less confident than you about the length of the rally, and also about the question whether the resources will drag up the market as a whole. But I don't deny that that may happen. IF we get a continued rally for some weeks, then I think it has in fact already started, even though the US went down last night and the DOW sank below 10,000. There is still some doubt in my mind about the strength and the consistency of the rally, but it could be quite strong.

The momentum is caused by bulls who have waited until they saw the markets at a low for 10 months or whatever and then jumped in. There is, I think, nothing other to the matter than that, although of course people try to justify their actions by claiming that the Greek problem is solved etc. - sheer nonsense. Europe should be seen as being in a bad way, and in a sense a time-bomb. So in essence the rally lacks any foundation rather than a bullish sense that prices were / even ARE "low", and that a rally was sure to come. I think that IS happening (already) and that it CAN be traded, but with risk, and with much depending on the choice of stocks and skill in timing on the part of the trader.

However, given (a) my doubts; (b) the fact that I don't need to sell ETF GOLD (and would not find replacement easy); and (c) the likelihood, which you also see, of a fall afterwards, when ETF GOLD would come into its own again, with many well-qualified students-of-gold predicting MUCH higher prices, I think I shall quietly hang on.

The only thing I find myself tempted by are a few stocks like Cash Converters, which are doing well on the fact that the economy is much less strong than the financial industry and the government think or try to make us believe. To my mind it is by no means an accident that this company is going well, along with Thorn (which rents out appliances, including wealthy clients among its customers), and a few others of this nature. With them you are likely to be on less of a yo-yo than with many of the miners.

With miners both the upside AND the downside are big. Sure, at the moment they look good, but the tax is still hanging over everything, and much in the world is not sound. Hence I find a miners' rally - which at THIS stage it largely is - still a dangerous thing to invest in.

I agree with those who feel that even now the market here is actually quite expensive for many stocks. I had a good look at many of them yesterday night. Roger Montgomery found only four stocks on the whole market which he liked. While I only partly agree with his choices, I do agree that there are not many to embrace without hesitation. And one thing that worries me about these miners is that some of the rises PER DAY are huge, as are the falls, when they occur.


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ody
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Thursday, May 27, 2010 - 05:53 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Futures

For most markets these are very good. For ours (ASX200) I can, on Bloomberg, only find 19 points. This seems comparatively low. Might it be that people feel that after today's big rise a calm day would be in order??

After all ... with a currency at times below 83 cents US (as it has typically been, though at times lower), and a share market underperforming most in the world, our Aussie market would have seemed like an absolute steal to some outsiders a few days ago. To US buyers, our market's decline amounted to 24%, which would on the surface have seemed a potential godsend. But perhaps they are getting a bit overawed at the speed of the current rise in this country, where resources have been bid up very fast though a huge tax risk is hanging over the very stocks bought? And possibly they still distrust the dollar too, under those circumstances??


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market_mad
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Thursday, May 27, 2010 - 10:13 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,

With futures, you have to understand that the Aussie market leads the world - first out of bed. The 'reason' we are only up 19 points is because, the US was down last night, we were up today so we are a market leader for the most part and try to predict what the US will do the next session so if we were a follower we would have been down today and not up. Our market was strong from midday onwards on the back of rising US futures. SO as their futures go up in off market, our market rises or vice versa.

When our market closed you would have found that the US futures would not have been as high as they are now - around 0.5% lower, so we had factored in that they are going to rise 1.5% tonight by our close of business, but as they have risen a further 0.5% since our physical closed, that is why we are up "only" 19 points.

Cheers
MM


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gdd3
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Thursday, May 27, 2010 - 11:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy and Co. .... Re: conditions affecting the price/value of ETFS.GOLD

Rudy said above...."Unfortunately the POG is not the only influencing factor in the ETF GOLD. The other main contributor is the AUDUSD which if a significant rally takes place in the XJO will follow the index up."

Yep, absolutely right, A$/US$ is a main contributor! And you have also stated a few times before that ETFS.GOLD has been fortunate in that past month because its had a 'double impedious' in that the A$/US$ has gone down whilst the POG(US$) has gone up(the latter part of my chart below shows this) . However, a simple way and more accurate way of determining the price direction of ETFS.GOLD is to follow the POG (in A$). Again, the chart below clearly shows that the price value of 'stock'(ETFS)GOLD is 'really' the POG in A$'s(Green being ETFS.GOLD and Pink being the POG in A$)....almost identical no matter what fluctuations happens to the A$/US$ relationship.

Some interesting observations appear here in the 30month period I have shown here with ETFS.GOLD activity. Now remember, as Rudy has pointed out previously, that ETFS.GOLD price has 'zoomed' over the past month because we've had both the POG(in US$) and the A$/US$ moving in opposite directions; POG up and A$ down!. This has happened before; take a look at the short periods 11 Sept.08 - 9 Oct.08 and Jan.09 -late Feb.09 for example...ETFS.GOLD up strongly on the back of POG moving up at the same time as A$ going down. Note also as soon as the POG turned on the 10 OCt.08-03 Nov.08, whilst the A$ continued with weakness, the price of ETFS.GOLD also plummeted!

To contradict both these examples you can see two periods where the price of ETFS.GOLD rose 'on the back of' both the A$ and POG(US$)rising together(Dec.07-Mar.08 and Nov.08- Jan.09. And you can find periods when ETFS.GOLD merely rose on the back of POG(US$) rise only.

This all only goes to underline that there is only one 'constant'...ETFS.GOLD price is best related to the POG(A$).



Cheers
DOLPHIN


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ody
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Friday, May 28, 2010 - 12:06 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM: I find that now, some hours later, the figure for our market tomorrow is 39 points up, which seems more like it - I should no doubt look at the same time every day.

Dolphin: I agree with you regarding ETF GOLD, i.e. that "there is only one 'constant'...ETFS.GOLD price is best related to the POG(A$)." And, actually, I find that when all is said and done the best way for the stock to be constructed.


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ody
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Friday, May 28, 2010 - 01:14 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Plenty of strength in markets tonight: we are definitely - and strongly - rallying, after the low point that was reached a few days ago when bulls clearly decided that they should move in. With this kind of momentum, and even allowing for the odd down day, most markets in the world should continue to go up for a while. Australia is a bit erratic, and still quarreling about the resources tax, but here too people seem to be getting confident about the market, at least as a trading proposition. The rally will still need a broader base in our case, though. But it may be in the process of getting that.

I see no sign of the opposing forces on the RSPT surrendering ground, in fact, so I think the market is going up as part of the global mood at this point. Mainly the general sense that prices had reached a low. That is how corrections, like rallies, come to an end when they reach a particular level. But this is most likely a temporary rally for all that, and can easily be abandoned again on e.g. bad news. It's not the beginning of a new bull market, that's for sure.


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bridog
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Friday, May 28, 2010 - 02:16 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Effect of currencies on commodities.

A couple of days ago I wrote:

"resource prices while not a their peak have not crashed, and some would be positive possibly even peaking in AUD terms."

Here are the figures promised at 26 May:

AUD CURRENT 30 APRIL
al $2459 $2347 UP 4.5%
cu $8294 $7899 up 4.8%
ni $25896 $$27560 dn 6.0%
zn $2307 $2420 dn 4.7%

USD CURRENT 30 APRIL
al $2025 $2184 dn 7.3%
cu $6830 $7350 dn 7.1%
ni $21325 $25645 dn 16.9%
zn $1900 $2252 dn 15.6%

Our miners profits have certainly been shielded from declining commodity prices, but of course not by government sabotage.


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ody
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Friday, May 28, 2010 - 08:09 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



EXTREMELY strong performance overnight, on several markets, including Wall Street. CNN argues that this is because the Chinese have made plain they are not going to desert European bonds. That may be a factor, but the rally was already gaining momentum anyway. People currently seem to have shaken off their fears, although they will certainly be revived somewhat further down the track.


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rdumas
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Friday, May 28, 2010 - 08:17 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Well said gdd3,

Which is why I posted the spreadsheet providing the conversion from POG in US$ to ETF GOLD (in A$) some time ago. Unfortunately there may be some who don't recognise that retracements of 'lower degree' are much smaller than retracements of 'higher degree' which is what we are about to see with the ETF GOLD.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Friday, May 28, 2010 - 08:35 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy, - You are on the ball: on Yahoo, the A$ has now risen (roughly) from 83 US$ to 85 US$ (overnight), and the price of gold as listed elsewhere has dropped, though only fractionally. I may do some selling - but probably shan't quite the whole parcel, as I think there are still many uncertainties. Nevertheless, the trend is plain. And I shall be happy to buy back in at a later point.


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baysider
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Friday, May 28, 2010 - 08:45 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I know I said i wouldn't participate but CBA below $50 was too tempting as it always seems to be the strongest and least volatile of the big 4. Also picked up a smattering of an old favourite IIN.

One you might like Ody is RHC. I'll be looking at this one today and hope it gets missed in the chase to buy commodities. You never know they may have a bed for you in later years!!


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ody
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Friday, May 28, 2010 - 10:26 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy/Baysider and others

I sold half of my holding in ETF GOLD this morning, and am keeping the other half even though I think it too is likely to go down, but I still like the general sense of relative security that I derive from some gold, and as we live in an uncertain world and the current situation could at any time reverse which would send gold up, I am quite content with having "a bet each way". I shall buy in again with the amount I have just got myself when the price is lower, for I feel pretty confident that it will not just go lower this time but certainly higher in the longer term. Accordingly, I shall be watching it attentively all the time, and I look forward to re-buying.

Not sure that I shall do anything else with the money in the meantime. I am not keen to punt on resources, even though I suspect they may go up further yet. And I am somewhat uncertain about other stocks that I like, becauseI don't think they will be as eagerly sought. And as well, it is hard to say how long the current enthusiasm will last, although it is clear that the buyers currently are clutching at any comforting straw they can find.

Actually I don't think it is just "natural" bulls that we see acting, but also that many former bears who are capable of changing their minds - at least for the purpose of a rally - are now acting in bullish fashion ("not missing the boat").

My loss relative to yesterday's price was small, and my profit on that half holding is very satisfactory. All in all I am very happy to have had the stock since February, and even the amount I spent fairly recently still went up.


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rdumas
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Friday, May 28, 2010 - 10:35 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Intermediate Targets for XJO

Hi Folks,

I now have 50% of my 'liquid' capital invested in STW now. Some intermediate target levels for the XJO are shown below. Obviously the market will not go up in a straight line and will need some 'rest stops' along the way.









I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Friday, May 28, 2010 - 11:04 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody,

I suspect that you will not regret exiting out of some of your ETF GOLD. There is a reasonable likelihood that the stock has reached a medium term level high and I expect that it will not bottom for several weeks. You can at least rest easy knowing that you have some real profits sitting in the bank.

My next term date (ie, intermediate high) for the XJO is around the 7th June. Obviously there will be the usual ups and downs (subwaves) in between times.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

 
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