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Trade Trends with Bollonger Bands and Twiggs Money Flow

Archive through June 11, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through June 11, 2010

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market_mad
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Monday, June 07, 2010 - 10:32 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,

I'm not convinced we are going to rally from here. Unlikely that we will close today above 4380 (currently 4331) on the ASX200 combined with an extremely bearish move in the US on Friday. 4000 - 3850 is the target over the next month or 2.

If the ASX200 does somehow manage to rally and close above 4380, I will assess my levels.

Cheers
MM


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eblode
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Monday, June 07, 2010 - 10:48 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)



BRAVO ODY!

Your views are the mirrored reflection of mine. For that reason I will buy a swag of BHP and a bit of CEY in anticipation that the pressure must force a change in forthcoming TAX legislature.

Eugenio







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jaded
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Monday, June 07, 2010 - 11:40 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)



We all agree that the Mining Tax is contributing significantly to the Materials Sector's Woes/DownTrend.

We also agree that the pressure is overflowing for this Tax to be 'scrapped',at least in it's current form.
However I have yet to see How/Where the alternative Revenue Stream will come from to replace this Tax?

Suggestions? Gov't Cost Cutting will never be Enough.A major,new Revenue Stream is Required.
Suggestions as to where this revenue will come from?


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

Sir Zelman Cowen c 1970.

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peterloh
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Monday, June 07, 2010 - 12:40 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 am in full agreement on your hypothesis on Labour backing out of the RSPT. The Ozzie $ slide may stop, investment sentiment on mining and others will improve,
there will be an immediate return of foreign funds and capital back to Australia.We will see employment improve and investment increase. The prospects for the Australian economy and $ will improve.It is hard to separate the interest of union members and society in general nowadays as the mutual interests are the same.Members also have a lot of their money in investments through their superannuation.

Labour's intention may be good, but by doing too much too soon without appreciating the consequences of their action
may cause more harm to their members, the public in general
and in the end set the country back instead of advancing the interest of the country.Our economy is no longer on the sheep's back but more on our mining resources.Any action that may affect our mines will have a bearing on our economy.

In life, if the solution is more costly then the problem, then we should look for alternatives.Is speed for the internet for rural areas that important as it only benefit a few at enormous expenses to the country? Can we look for other alternatives or solution? I do not think that shareholders in Telstra are happy as they were sold a "dud"
and now the government is going to compete against them after selling to them.

I feel we have not completely come out of the global financial crisis yet. The stimulus have helped in solving
some of the problem during the GFC plus China's stimulus to their economy which benefited Australia. Now the stimulus have been withdrawn and if not withdrawn completely and China which we are very dependent on our export is also doing the same, 5 speedy increases in interest rates in a very short period will act as a deterrent to investment and spending, may cause another shock to our economy instead of helping it to recover.


-------------------------------------------------
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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gdd3
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Monday, June 07, 2010 - 12:43 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)



Suggestions??? Well from Eugenio of course! Sorry, couldn't resist the urge....stupid comment(mine not yours, D'jaded)!

Back to the XJO....well



...and if 'fullfiled' then no reason for GOLD not to break 'new' ground and head towards $165...maybe!



Dolphin


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jaded
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Monday, June 07, 2010 - 01:20 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)



I'm looking for Alternative Revenue Raising suggestions so I can prepare for eventualities.

TheRSPT was mooted back in January as part of an overview of [I think] Henry's Tax Reform.
January but I wasn't aware of it so did not Risk Manage,Couldn't thru not being informed.
So it has to be recognised that the RSPT is a Major Revenue Source and will have to be repaced with..what?

Capital Gains on your own home if it's over 1.5/2 million?
Capital Gains Tax on Super of the Retired?

Increase the GST Rate?
How will what replaces impact on Economy similarly to the RSPT?

eblode's suggestions?I can't see that CEY has been all that impacted by the RSPT[see chart] so can't see it rebounding significantly.BHP has other woes than this tax and similarly may not jump in much of a sustained way.
Prospective New Miners,however is 'different'.

Do you follow,gdd3?or do I have to get out a Megaphone?
Backing Down on the RSPT will only bring another Hydra Head of Tax,New Tax into play.
What could it be now?


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

Sir Zelman Cowen c 1970.

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peterloh
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Monday, June 07, 2010 - 02:23 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)



Jaded/Ody

My understanding of a good tax is one that is broadly base.

In an attempt to give away too many freebies, the government has to think of ways to raise the money to do it. Sometimes in doing so it punished certain sectors just because they seemed to be doing well, we try to squeeze money out of them. Unfortunately it is also the straw that broke the camel's back.


-------------------------------------------------
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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Monday, June 07, 2010 - 03:25 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 Jaded,

They could have a go at attacking the Superannuation system and making dramatic changes there. That however would definitely be the death knell for the Labour Party.


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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Monday, June 07, 2010 - 04:45 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)



I reckon that if they back down from the resources tax - the only thing I can see that they could attack would be the banking sector - next biggest profit earners. That might be a vote winner.

I have thought for a while that they would attack the banks in any case but the backlash they are receving on the mining front might have put that plan on hold (for a while)

Cheers
MM


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ody
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Monday, June 07, 2010 - 04:46 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)



Raising revenue

The RSPT is not gone yet!!

The mere possibility/probability that it may not survive in its present form does not mean that the resources companies will not have to pay more. But I agree with Peter Loh that the more general - and more viable - solution would be to look for a whole ARRAY of possibilities, not just one thing. Even tactically it is stupid just to target one sector of the population.

If there is a genuine case for taxing companies more, then probably other sectors than resources should also be taxed more. I must say I have doubt about this whole approach, as it is ultimately business life which tends to generate the most wealth for a country, and our company tax rate is already fairly high.

I would have thought that cigarettes would certainly be a very likely target, and possibly alcohol, though the latter might be politically harder than the former. With its huge debt, the government WILL need to gain more revenue from taxation - it will be difficult to avoid that. Probably, with what is in effect a socialist approach, higher taxes for the rich (as defined by Labor) would be a target - not just companies would be expected to deliver, but also those who earn the most. A drawback of that is that any country doing this will always lose people to other countries that tax less heavily, but this usually does not greatly bother socialist governments, and in general Australians quite like cutting down tall poppies, so "taxing the rich" may be far more feasible than just the mining industry.

At the same time, it will be at least as important for the government to look at REAL ways to keep the economy dynamic. What is not wanted at all, obviously, is more wasteful stimulus money for the buying of votes, but an effort to identify which kinds of enterprises can be made more viable. For the key thing that this government has not understood is that money needs to be MADE, and made more and more, if the country is to prosper, and to get its budget back into the black. Just taxing people will be a poor solution. But, as Peter says, I'd expect a fairly broad range of taxes.

The government will no doubt also borrow to try and get itself out of trouble, so we can expect more government bonds.

Attacks which would be politically suicidal in this country would be taxes which in other nations are not abnormal, such as a tax on the sale of the family home (beyond a cut-off point, possibly), death duties, etc.

The government will probably want to avoid wading into these very sensitive areas, as they appear to be "no go zones" in Australia. Ken Henry has been looking eagerly at a number of these possibilities, but if Labor can produce any good sense in its thinking at all it won't readily listen to him again. He, after all, was the architect of the RSPT which has got this government into such deep trouble. AND he was the one to advise Rudd and Swan to stimulate the economy "hard and early". Both pieces of advice have ultimately considerable harmed the government's political standing. A moderate, well thought out stimulus package would have brought Rudd lasting kudos: by now most people will feel convinced that what Labor chose to do in this area was as ill-conceived as just about anything else it has thought up.


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rdumas
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Monday, June 07, 2010 - 04:51 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)



VIX Channeling

There's no doubt about the volatility in the VIX but so far it is sticking to its channel. To date there has been 4 tests of both boundaries. You would think that one of the boundaries will be broken soon.





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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peterloh
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Monday, June 07, 2010 - 05:48 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 has mentioned issuing bonds as a means of raising the funds. During low interest times, it is a good option as the government can always made redemption at a future date.In normal times this could also be done, as these bonds will have a capital loss if external interests are higher.The government can always redeem to reduce the government debts then.Certainly using government bonds is a good option.
We don't have to cover the deficit over night. I think the government is trying too hard just to show that they are managing the economy well, but instead they have made things worst.

Cutting of waste is very important for the government too, as these will lessen the funds required.Thus pressure to raise funds is not so great to finance their new expenses.

At this point of time, I do not think that raising taxes will help, as I believe that the economy is precariously balance. We need to encourage investment and maintain the current employment. By increasing investment and improving employment will itself improve the government's revenue.

It is not the time for the government to be adventurous now. In fact in the first 3 years of government, the party that just got in shouldn't change too many things but learn on the job.In the second term, they can stride out more boldly as by now, they would have learned the game. Whether the government likes to admit it or not, they have now made blunders in whatever they do, one after another. This is because they think that they know everything, just like a new graduate, but lacking in experience. Unfortunately in real life, theoretically everything seems good, but as they are not practical, they back fired.

It is not a bad idea to increase superannuation. However have the unions or the government reason that they could have part of the annual increase in their pay in the form of superannuation? In this way, the increase in their pay do not have to put up with the marginal tax rate. If that is the case, new taxes do not have to be raise just to accomodate the increase in superannuation.

Resource taxes - it is just not the right time to introduce such tax at the moment. Many of the mining companies have emerged from the GFC barely out of danger. Many have to invite new equity at a discounted price in their shares issue just to survive.The government must have rocks in their heads to do it now. Most of these smaller mining companies are not even out of danger yet.Many miners even have to give away control of their company just to stay in business.

Perhaps a resource tax could be introduced in the future for new projects and at a lower rate to gain acceptance first.NOW is not the time to do it.I think the population is on the side of the miners, even the union own members.
Barely have their job been secured, here comes a new tax to threaten their employment.


-------------------------------------------------
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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ody
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Monday, June 07, 2010 - 11:37 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)



(1) Peter Loh:

Things the government might USEFULLY do ... well, I agree with what you say in your post. I hope that you didn't take my post to mean that I felt they ought to introduce a resources tax: rather, I was trying to guess what they MIGHT do, not stating what they should do. I would broadly approach matters the way you are describing, I think, if I were in office - but then, I can only capably look after a super fund, not ruin the economy in the way that PM Rudd seems to be so good at doing. I'll never equal him!

(2) ETF GOLD: The only thing I regretted today is that I sold half of my holding the other day, for today the stock went up nicely, by 4.7%. I do not agree with the view that the stock has had its best time already: with the world becoming increasingly recessionary economically, and mentally becoming more risk averse too, I think that gold will continue to be a winner. For sure, whenever there is a rally gold may go down a bit, but on the whole I think markets will go down rather than up. And certainly commodities and our currency are not wanted much, in contrast to gold.

(3) SOCCER NOT GOOD FOR SHARE MARKETS!

Look at this interesting bit from Alan Kohler on the Eureka Report:
--------------------------------------
Most countries lose the World Cup, obviously, and for all of them – winners and losers – it is a stressful time (the AFL and rugby fans among us perhaps don't fully grasp the importance of soccer).

The Swiss Finance Institute did a two-year study of the impact of the World Cup on the stockmarket and found that "with increased stress investors become more risk-averse. The World Cup is associated with increased heart attacks and lower worker productivity."

So they studied 11 World Cups over 41 years. The average performance of the US stockmarket over the period of the tournament has been minus 6.25%, which equates to an annualised decline of 46.6%. This compares to plus 1.27% (10.6% annualised), which corresponds to the average all-day average return for the same period during the rest of the time.

The SFI concludes: "These results are statistically highly significant and stable under rigorous checks."
-----------------------------
But isn't it likely, since the AMERICAN market is mentioned and soccer is not played there, that the period in question is likely to be poor in performance for other reasons as well (or perhaps primarily?). As we so often get told: go away in May (etc). Nevertheless, the study dealt specifically and ONLY with the years that the world cup was played. So perhaps the impact on the world at large was transmitted even to Wall Street????

(4) Rudd likely to stick to his 40% from what I can see. He appears to feel that if only he "explains" himself better to the nation people will surely see how good his idea is, and I think he actually believes in his own nonsense. There is also the problem, for him, that any backdown will seem weak to HIM, for one thing, and that he will think that the nation too will reject him as weak. That is not certain at all. But I, for one, am happy to see him stick to his dogmatic decision, as that will only infuriate people the more.

I think that his megalomania has increasingly gone to his head. Apparently he is governing only with the "gang of four", and wants himself to be involved and in charge at all times and on all points - as a proper control freak.

The world has seen many dictators of his type, and they are often utterly determined to pursue whatever they set their minds on. Usually they don't surrender, but prefer to crash. They think they will "crash through", but even if they crash instead they seem to think more highly of themselves when that happens than if they had surrendered, or even compromised, instead. So it would not surprise me if he rigidly sticks to his script and takes it to the electorate. If he loses he will be very angry, and blame the people of Australia for misjudging his genius.

I very much doubt that Gillard will want to take over at this stage even though many seem to think of that as a good strategy for Labor. It carries great risk for her, for if she does not win (and I doubt she would), she would be in a worse position than if she waits. The way I see the scenario at present Rudd has set himself up to lose (though he still thinks that he will win), and in the event neither Gillard nor her supporters will actually challenge Rudd. As a result, Labor will then have a far stronger case for throwing him out when he loses, and putting Gillard in his place. She would then be very much better off in opposition, biding her chance to dislodge T.A. However, she will have to show that she can operate in the mould of Bob Hawke, and that may not be easy for her, ideologically.

At this stage, it looks as though "Brand Labor" has been very seriously damaged by so many events that Rudd will probably stay on the nose.

(Message edited by Ody on June 08, 2010)


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ody
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Tuesday, June 08, 2010 - 12:14 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)



Wall Street is somewhat more positive right now (but hasn't been open for long). It appears that some good figures showing that Germany, at least, may be improving on the basis of factory orders are making people a little less worried, and of course markets have been savaged rather. So an up day for Wall Street would not be surprising, and may flow into our market too ... but it is early days, and commodities prices are not encouraging. Our market does not look like a favourite at the moment ... Still, strength in Germany is certainly something people will be very much hoping for.


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market_mad
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Tuesday, June 08, 2010 - 09:31 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)



Main reason for the 'strength' in Germany is stemming from, yes factory orders, but also a report out last night that the Euro will not exist in it's current form within 5 years. As an exporter of goods, this will help the German index and exporters.

Our futures seem to be a bit on the optimistic side this morning given the falls in the US overnight and I would expect that we will trade lower than what they are predicting on the day.

With commodities off again, yet again gold the only star performer, I would expect the ASX200 to test the 4285 level and if that is breached then the low point of 4265 will come into play. If that doesn't hold then we are heading down to 4185 over the coming days.

Cheers
MM


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rdumas
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Tuesday, June 08, 2010 - 11:29 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)



PSSSSTT.....CAN YOU KEEP A SECRET???

I have never seen what I am about to tell you written in any book on Elliott Wave. This is something that I have noticed recurring time and time again within share market patterns that can be taken advantage of in trading the market using EW techniques.

What I've noticed is that the basic wave structure consisting of a 5 wave impulse followed by a corrective wave (either 3 wave or complex) followed by an other 5 wave impulse wave is one of the most common patterns that continues to repeat time and time again in global indices.

When seen in isolation, this pattern is called a Zigzag. This 3 wave pattern basically looks like this:



Normally Zigzags are corrective waves but this same pattern is seen in impulse waves as well. We can clearly see from the following diagram that an impulse wave is composed of two Zigzags.




The lesson to be learnt from this is that one should aways be on the lookout for a higher level wave pattern that starts with an impulse pattern and is followed by a corrective pattern whether the corrective pattern is a 3 wave pattern or something more complex. The reason for this is that the next wave pattern will in all probability be another 5 wave pattern whether it be another impulse wave or an ending diagonal.

Of what practical value is this to the analyst? Well, if we expect another 5 wave pattern then we can not only have some idea of what lies ahead but also we can start looking at the wave relationships of the two impulse wave patterns.

Take for example the pattern that has formed on the S&P500 in recent times. In amongst the spaghetti of waves we can see that there has been what appears to be an impulse wave followed by a corrective wave. I have labeled the proposed Zigzag pattern ABC.






Last night the S&P500 created what may be a wave 1 of the next anticipated 5 wave pattern. Note that it has a similar range to wave 1 of the previous impulse wave. It is when you see these likely patterns that you can start looking at the Fibonacci relationships of the corresponding waves in the two impulse patterns.

Now nothing is guaranteed in the share market but it is our role as analysts to look for likely patterns forming. At the pattern develops we can soon see whether the anticipated pattern is valid or not. At least by carrying out this process we can see the market in some sort of context.

Armed with this information, we would expect that a rally for a short period was possible on the US market tonight in order to form wave 2 of the anticipated pattern.

The other approximation that we can make is where at which level this correction may terminate. Based on wave equality between waves A and C we can have a guess at the correction possibly terminating around the 973~980 level. Other Fibonacci relationships of 61.8% and 161.8% could also be used.


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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Tuesday, June 08, 2010 - 12:44 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)



Way off the mark!

Well, I really didn't expect our market to rally today on the back of the falls in the US overnight. Some serious buyers came in early and it seems to held support at current levels.

There is a gap to be filled up to 4420 and it wouldn't surprise me to see the market make a push up there.

This rally today is broad based with the majority of stocks on my watchlist in the green, some quite significantly.

I agree with Rudy's summation and expect this rally to be short lived though.

Nervy times indeed.

Cheers
MM


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breaker_1
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Tuesday, June 08, 2010 - 12:48 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 would be interested in your take on the NSW government,they seem to entice business /capitalism re no stamp duty and why they are in surplus

Thanks


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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ody
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Tuesday, June 08, 2010 - 12:59 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)



MM, - Extreme volatility, in both directions, is a typical mark of a bear market, particularly as it slides into its second low. I have by now seen it happen a few times - this is symptomatic. On an individual day that makes it hard for any of us to pick the market for that day. However, the consensus emerging here, i.e. that a rally in our market is hard to achieve, still stands as firmly as before. One would have to argue that unless we go into absolute free fall (not yet apparent), inevitably there will be up days. The fact remains, though, that the market is suffering from increased nervousness.

Let us take the situation in the US today. How much of its "recovery" is due to stimulus spending? You guessed it - near enough 100%. Here is an interesting extract from a Business Spectator post by Alan Kohler:
--------------------------
The IMF estimates that US government debt will be 110 per cent of GDP by 2015. Like Viktor Orban [in Hungary], Barack Obama is going to have to rein it in.

So, then you look at how much of the growth rebound of the past 12 months has been due to debt-funded stimulus from the government: yep, pretty well all of it.

John Hussman of Hussman Funds says that adjusted for government deficit spending, America’s “year over year growth rate since early 2009 now matches the worst performance of any of 50 years preceding the recent downturn”. (It’s roughly zero).

That’s why the market is so sensitive to any sign that the private sector candle is sputtering.

Last word to the 85-year-old Richard Russell [whose record is outstanding, - Ody]: “The total cost of the Obama-Bernanke plan to halt or reverse this bear market is becoming bizarre or fantastic. I warned that the primary trend of the stock market cannot be halted.

“Now we are seeing some of the fearful results of Obama's and Bernanke's ignorance. It shows you what can happen when professors face the real world. Yes, Obama and Bernanke were both professors.”

[With respect, we are not ALL so unworldly ... although a professor, I certainly do focus on what happens in the real world. But, having been involved with academia since I enrolled as an undergraduate in 1958, I feel the same about academics generally as Russell does. In a family containing many academics, my business-man nephew and I really stand out as rebels in not despising "the real world".]


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ody
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breaker 1: I am of course very interested in the subject you raise, but know too little about the NSW government and what it is doing to be able to say anything really sensible or well-based on its performance either politically or economically. Sorry - but I'd just be making a fool of myself.


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ody
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NSW budget: breaker 1

I must say I am impressed by the figures I see below (from Business Spectator). Reductions in such things as stamp duty (or even the total abolition thereof) are more typical of a business-like government than a socialist one, and if this is indicative of what the NSW government is doing then it sounds as though it has a better understanding of business than Rudd and Swan. The good results may of course have resulted purely from NSW's specific situation - but one would hazard a guess that probably its government got a few things "right", as well. This would not be at all incompatible with various political difficulties being experienced. A government may be full of corruption, mishaps, fights, etc., and yet take the right economic steps. But I am speculating! Anyway, the figures seem heartening. Traditionally, NSW seems often to have been more business-like than some other states. That is why since I came here in 1976 I have frequently heard of "the NSW right" in relation to its Labor party, and the "loonie left" in Victoria (Joan Kirner was a typical example, and when you see how badly they manage grave matters like fires there you can see that incompetence is certainly not lacking in action).
------------------------------------------------
NSW cuts stamp duty in budget

AAP

The over 65s and those buying homes off the plan will benefit from the country's first zero per cent stamp duty, under the NSW government's latest budget showing the state back in the black two years earlier than expected.

Treasurer Eric Roozendaal has announced a surplus of $101 million for the 2009/10 financial year – a massive turnaround from the deficit expected a year ago – as the government issued its final budget ahead of the 2011 state election.

Surpluses are also forecast out to 2013-14, making the effects of the global financial crisis a minor blip in the state's economic history.

For 2010/11 a surplus of $773 million is expected, ahead of $885 million in 2011/12 and $863 million in 2012/13.

In the previous budget, the government had expected deficits out to 2010/11, including a deficit of $990 million for 2009/10.

In the 2010/11 budget handed down on Tuesday, Mr Roozendaal said the state had weathered the global financial crisis better than expected and would now focus on consolidating the economic recovery.

"The beacon of hope I talked about last year has lit the path to prosperity," he told parliament in his budget speech.

"Today, I proudly announced NSW is ... already back in the black.

"The budget result for this year represents a $1.1 billion turnaround - and over the next four years, budget surpluses will be worth a total of $3.15 billion."

The headline announcement of the budget was stamp duty cuts totalling $140 million, including the country's first zero per cent tax, for off-the-plan purchases worth up to $600,000.

Under the two-year plan, beginning July 1 this year, those purchasing properties off-the-plan will pay no stamp duty, a saving worth up to $22,490 each, Mr Roozendaal said.

The over-65s will also get a stamp duty exemption for the same period, to help them downsize to a new home.

"This will apply to people over 65 who sell their primary place of residence and move to a newly-constructed home - whether it is house or an apartment," Mr Roozendaal said.

A 25 per cent stamp duty cut will also apply to those buying a home worth up to $600,000 which is under construction or just completed.

Mr Roozendaal said the measures were aimed at boosting housing supply and housing construction rates across the state.

"A key driver of economic growth," he said.

Business is a big winner from the budget, with the already announced payroll tax cuts and the abolition of the insurance protection tax from July 2011.

Tax cuts for the budget, including the stamp duty measures, total $180 million in 2010-11, and $201 million the following year.

Tuesday's budget also sees a dramatic fall in the state's unemployment forecasts.

Last year, in the midst of the GFC, treasury had predicted the unemployment rate would hit 8.5 per cent next financial year.

Instead, unemployment of 5.5 per cent is expected for 2010/11, dropping to 5.25 per cent in 2011-12.

Gross State Product (GSP) growth also rebounded significantly, to 2.5 per cent for 2009/10, from a the previous budget forecast of a decline of 0.5 per cent.

The state's GSP growth for 2010/11 is now predicted to reach three per cent, and 3.5 per cent in the following year.

The budget also included a record $16.4 billion in health spending, and $22.3 billion over four years to fund measures in the government's Metropolitan Transport Plan.

The state's road network will get $10.6 billion, including $3 billion for the Pacific Hwy, $750 million for the Hume Highway, $680 million for the Great Western Hwy, and $500 million for the Princes Hwy.

Infrastructure spending will reach $62.2 billion over the next four years, creating 155,000 jobs, Mr Roozendaal said.

"Together we stood firm against the global economic crisis and together we will share the rewards of recovery as we build the next phase of our economic growth," Mr Roozendaal said.


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ody
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Breaker 1 - NSW budget:

The following paragraphs from The Australian probably explain a good deal:
---------------------------------------------------
The budget papers reveal the pain generated by the global financial crisis has been about half of what was originally expected by NSW Treasury officials, with a $10 billion loss of tax revenue over the four years to 2011-12 revised down to $5 billion.

The NSW economy has rebounded strongly, courtesy of the property sector, with the state growth forecast for the current financial year revised upwards by three percentage points to 2.5 per cent.
------------------------------------------------
The fact that there was less pain than expected may be due to (a) the Treasury officials being too negative (as has not been untypical in Australia), and (b) the Rudd stimulus packages creating artificial "recovery".

Further, property had been performing poorly in NSW for a long time, and with the rest of the country punch-drunk with enthusiasm for that market NSW could hardly fail to go up as well. The current policy concerning stamp duty etc is designed to activate the property market yet further. The risk would be that this might be overdoing it, as property in Australia is increasingly in cloud-cuckoo land as far as sustainability is concerned.


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breaker_1
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Thanks Ody ,

Maybe they just made a mistake


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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oldred
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Hi
This is my first post but have been a regular follower for some time.

I recently attended an ATO seminar on SMSF's.
We wished to transfer 50k to my wifes super which we have subsequently done.
From my understanding there is no 15% contributions tax as that is only applicable where a deduction is made for the contribution.
Stay clear of the CAPS as 46.5% tax is applied to all contributions made.
All transactions must be at arms length
In our case there was no advantage in transferring assets but easier to sell and repurchase within the fund as you easily a paper trail.

Terry


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eblode
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Cat Lady,
My latest foray into "puntland" is a lil beauty called HIN. It really sparkles
amidst the doom and gloom of the heavyweights. Check it out. Might be another GXY or COK. Never know.
Eugenio


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breaker_1
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Welcome Oldred,

Great chart Eugenio

hin


When one door closes another door opens; but we so often look so long and so regretfully upon the closed door, that we do not see the ones which open for us.

Alexander Graham Bell





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jaded
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What is the status of "Guaranteed Bank Deposits"?
Has it run out yet or is there months/weeks to go?


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

Sir Zelman Cowen c 1970.

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ken
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Tuesday, June 08, 2010 - 09:53 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)



Jaded,

The guarantee was made for 3 years from 13 October 08, making it October 2011 before it runs out. Amounts over a $million and the guarantee on borrowings of Australian banks were removed in March this year, but there are lots of ins and outs in that area.


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ody
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jaded: Guaranteed bank deposits were put in place by the government for three years, and the time has not yet passed. There has been talk, however, of their reducing it, but I am not aware that that has happened. Obviously it that DID happen you would expect people to know very well indeed that the guarantee had been scrapped. So at this moment, unless I have missed something major (as this in theory would be), the deposits are still guaranteed.

The measure has had some very silly side effects. From the beginning - as is usual with this government - the matter was badly managed. It was decided that the sum which an institution pays by way of insurance - so that the guarantee shall indeed be operative - would differ from one institution to another. From that moment, the big four were firmly set on a path to riches - as far as THIS matter was concerned - as they were (rather arbitrarily!) judged "safest", so that their payment ratio was the lowest. This helped them not only financially, but had the harmful effect that people concluded that the "minors" were LESS safe.

In a way such a situation tends to become self-fulfilling. As a consequence, deposits were placed with the big four, but not with e.g. Bendigo/Adelaide, Bank of Queensland, or Suncorp. The image of all these "secondary" institutions slumped, and they have had a hard time as a result. (An especially hard time, I should probably say - more so than is reasonable.)

Yet more comically, even proven Credit Unions lost some of their competitive edge, while in fact on the whole they are a good deal safer than the major banks, as (a) they have no shareholders to please (no pressure of dividends, therefore, and other things which shareholders demand, such as a rising share price), and (b) they do not borrow anything substantial from expensive American sources (as even now the big four cannot avoid doing) but almost totally (at least 80%) from other members. Those are also the people (like me) whom Gail Kelly etc are courting, as we supply safe money at a price which is attractive to the bank. In fact, for pure safety, I believe firmly that anyone seeking deposits should place some portion of money, at least, with one or more of the better-known credit unions.

I use Savings and Loans, which has withstood all sorts of tests for many years as one of the safest and best organised institutions in the country. By the way: Credit Unions, like banks, MUST meet APRA regulations. Your money is also guaranteed by the government in the same way as that of the big four. In fact it is in a safer place, but the only idiocy is that a credit union pays a higher insurance fee because the big four have been placed in a privileged position.

One serious side effect of this monumental idiocy, for which Rudd/Swan/Henry are to blame, is that the banks have had less competition to contend with. That then means that, under competition rules, they are DENIED - as a result of this unintended privileged status - the right to expand the way they would have been allowed to if they had not been artificially strengthened by this artificial discrimination. So a result is that their wings are clipped far more than if the guarantee had been introduced in a one-rule-for-all basis. Important take-overs which ONLY the big four could undertake are thus constantly under a cloud, and their competitive position abroad has suffered and will continue to suffer.

The guarantee had no doubt been intended to serve us all well. And, of course, it is unlikely to prove worthless - though it is ONLY for three years, and harder times for banks are still to come: that is already certain as a result of the global sources available to the world of finance, which have deteriorated (hence some of the main worries on share markets). The main drawback, however, has so far been that the implementation of the guarantee has created HUGE distortions within the financial institutions of this country as a result of inequitable and arbitrary treatment handed out to them.

PS: As I understand it from the institutions to which I lend, an amount with any institution that I lend money to which EXCEEDS one million is only guaranteed up to that amount as a maximum. For example, if I were to lend e.g Savings and Loans 1.3 million, then only the million is guaranteed,and the 300.000 is at my own risk. I am regularly in touch with both this institution and others, and they are unanimous in their interpretation of this rule. Therefore, it is "safe" to lend an amount up to a million to an institution, but if you lend more, then the "extra" amount is at your own risk. This has not, I must add, bothered me, and indeed I am not greatly worried either by the prospect of the guarantee being abolished. I very much doubt that any government in Australia would not come to the rescue if e.g. WBC or CBA could not honour its borrowings in the form of deposits. Apart from that, there is no reason to assume, in any case, that the guarantee will not be extended.

So, although it would be safest not to lend too much to any single institution, and to assume that the guarantee will be terminated in October 2011, one should not become unduly neurotic about the matter either. In any case I am quite confident that you can lend up to a million to one institution if you wish, and that only an amount above that is not guaranteed. There is no maximum amount BELOW 1 million up to which the amount is guaranteed: the guarantee runs all the way up to an amount of 1 million with any single institution. I do not imply, through this, that I have lent several amounts of more than a million to several institutions. I am merely talking about the situations which I need to explore, and constantly check. Our capital is to a significant extent placed in term deposits with banks and credit unions.

(Message edited by Ody on June 08, 2010)


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ody
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AT LAST ... common sense beginning to make an impact

To readers of this thread this belated re-rating by broking houses will not come as a surprise: several posts here have stated that forecasts were far too optimistic and that the "official" investment community was kidding itself, in its optimistic, smugly complacent attitude - ignoring the artificial impact of excessive stimulus, for example, along with all the danger signs of further troubles to come which are now in the process of internationally revealing themselves. Many thought we had actually moved into a new bull market, and had overcome both the bear market and any recessionary forces. This was a widespread but absurdly unperceptive and uninformed view, as the harsh reality of events is now beginning to make clear.

The rally in share markets was badly out of touch with the underlying fundamentals, and is now beginning to catch up with the reality which it has for so long ignored. (I am not talking about short-term traders as previously obtuse, but about those who thought it was safe to go long as though we were in an indubitable recovery phase, with no dangers likely to strike.)
-----------------------------------------------------
Stockbroking analysts to downgrade growth forecasts

* Sara Rich
* From: The Australian
* June 09, 2010 12:00AM

STOCKBROKING analysts are downgrading forecasts for earnings growth ahead of the June 30 profits season as ongoing turmoil in global markets undermines confidence in Australia's economic recovery.

A run of profit warnings from local companies, including Toll Holdings, Primary Health Care, Virgin Blue and Sonic Healthcare, has been a wake-up call that current forecasts may be too optimistic. AGL Energy recently upgraded its forecast full-year profit, but failed to meet the numbers expected by many analysts.

Europe's sovereign debt problems and signs of a possible slowdown in China provide the broader global backdrop that may mean forecasts for the next financial year may need scaling back.

Banks, resources stocks and the broader consumer sectors are expected to see some of the biggest downgrades.

Currently, the consensus is that earnings will grow by about 25 per cent in 2010-11.

However, Citi equity strategist Richard Schellbach said analysts were starting to question that and were likely to downgrade their forecasts over the next week, lowering the consensus by a few percentage points.

The sharemarket, however, seems convinced that earnings growth will be much lower.

Yesterday, the benchmark S&P/ASX 200 index rose 55.3 points, or 1.28 per cent, to 4381.2 points, while the All Ordinaries index added 50.5 points, or 1.16 per cent, to 4401.2 points.

"What the price in the market is telling us -- the fact the ASX 200 is down at 4300 -- is that it expects that number soon to not be 26 per cent growth for 2011, it expects it to maybe be only 5 per cent," Mr Schellbach said.

"I think the market price has probably become overly pessimistic," Mr Schellbach said.

"I think earnings are definitely going to be downgraded, but it remains to be seen whether they are going to be downgraded to that extent."

Citi forecasts earnings per share growth on the ASX 200 will be 11.6 per cent this financial year and 26.1 per cent in 2010-11.

Deutsche Bank expects 9.9 per cent this financial year and 26.4 per cent the next.

Both are bottom-up forecasts.

Merrill Lynch strategist Tim Rocks believes it is more realistic to expect 10 per cent growth next financial year, based on top-down analysis.

He suspects some analysts were too optimistic when factoring in the strength of the economic recovery.

"For the broader consumer sectors, the expectations are particularly high and I think people extrapolated forward the good conditions over the past 12 months without thinking that actually it was a pretty exceptional year last year given the low rates and the fiscal stimulus," Mr Rocks said.

Perpetual senior portfolio manager Matt Williams expects earnings downgrades for resources stocks and the banks.

"For the banks, it is about funding -- funding costs are most likely to increase thanks to the European situation and loan growth is probably going to be a bit weaker than what the market has expected," he said.


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jaded
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thanks for that,ken and ody.
I'd seen some mutterings about some change/lifting in March but you've told me what that was based on.

have some term deposits maturing so needed the info.
[not a million+ though]

thanks again.


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

Sir Zelman Cowen c 1970.

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ody
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With Wall Street firmly up (in part), and commodities a bit more stable - though note the rise of gold! - our market may go up a bit. But one would not expect any extreme move, and the futures don't suggest it either.

For one thing, with Rudd constantly reiterating his determination not to compromise on his beloved 40%, while he is now under attack from all sides (even various Labor and union officials), the market is not going to assume that this is a safe time for investment. The whole situation in this country is much too uncertain for that. Of course, there will be the odd trading rally, but predominantly sentiment is skeptical, if not worried. Europe, in particular, remains a pervasively alarming factor, and the US is an uncertain bet, with huge unemployment as a problem which Bernanke has tried to counter with his usual false optimism (not seen as false by Wall Street, usually, so it once again listened to its master).

In almost any other country what he said would perceived to be outright spin, but in the US people have virtually come to accept spin as the only reality worth listening to. Australians have come to change their minds considerably during the recent two months or so, and are not likely to take Bernanke too seriously.


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market_mad
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Market not happy this morning on the back of US Fed's Hoenig saying the fed should raise interest rates to 1% by September.

Dow futures off 55 points and Japan down 1.2%

Cheers
MM


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ody
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(1) Yes, MM: any hint to the effect that interest rates in the US should/will go up will have a negative effect on Wall Street. If, of course, the economy makes such a move necessary and can stand it, then it is actually sensible and necessary. However, investors won't interpret it that way, for one of the main reasons why many people invest in Wall Street is that they prefer "assets" to "money" which won't produce any money for them by way of interest rates. They would see 1% as detrimental to shares, while yet it is not high enough to buy such a yield. However, such "investing" as Americans engage in is actually highly dangerous as much of it is speculative (not based on any firm prospects for good earnings), and it would be much better if Americans DID have to pay for their money, and COULD earn a yield on it in the way Australians can (even if at a lower level).

(2) Another interesting point. The strongly "defensive" nature of such positive buying as is occurring in our market is obvious from good figures, currently, for consumer staples, gold, health, property trusts, and telecommunications. These are seen as providing essential goods and services (so as less vulnerable to economic stresses), or as purposeful in order to store/protect wealth (gold), or to provide a good yield (property trusts and Telstra). All the choices make sense if you are, in fact, preparing for a recession - particularly if you MUST be in the market or FEEL you have to be, but want to avoid undue risk. Not that it would be right to see such purchases as risk-free, but people do judge them as at least "less risky". In essence, such buying is actually more bearish than bullish, as an indication of where people see the economy as heading.


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ody
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From Business Spectator: Last update 9:58 AM, 9 Jun 2010

Robert Gottliebsen

*This tax will break Australia*

As the Prime Minister talks with leading Western Australian miners and starts to understand the potential size of his mining tax mistake, let me relate to you the stories of two physios which graphically portray the divisions the tax has created in the community.

Given the hard line the Prime Minister has taken, it will be very difficult for Kevin Rudd to back down to the WA miners although there is a compromise being worked out to deliver help for his beloved Queensland.

The simple truth is that these talks should have been held before the tax was announced and put in the budget. That way a sensible proposal would have been hammered out prior to the announcement.

Speaking about hammering, Michael is my first physio and he is in Melbourne. I was talking to him yesterday and it was clear that he believed that in the long term the tax would be good for Australia although there might be short term pain.

Matt is my second physio and he is doing locum work in Launceston. His father is in Perth and his partner is a female exploration geologist. He emailed me yesterday to explain that they were both preparing to shift to the Mount Isa/Cloncurry region where his partner had obtained work with a smaller exploration company. After the mining tax she was told not to come because there will be no more exploration.

Matt knows that once exploration stops the long-term future of the mining industry is bleak. Most of the residents in Sydney and Melbourne don’t understand these forces and cabinet reflects the view of their electorates.

In Queensland Premier Anna Bligh desperately wants the massive coal seam liquified natural gas (LNG) projects planned near Gladstone to get off the ground. The resource super profits tax will kill them as it will all other major new mining projects. (See The mother of all capital strikes begins, May 24.) But the coal gas miners and the Queensland Premier say that coal gas is similar to natural gas which is the subject to the lower petroleum resources rent tax and should be taxed that way. The petroleum resources tax does not cut in until a miner has earned 15 per cent on capital whereas the Rudd-Swan tax cuts in at return of about 6 per cent.

Some of the LNG projects can go ahead under the petroleum tax, but those same projects have no hope under the Rudd- Swan tax. If it happens that Kevin Rudd and Wayne Swan back down on coal gas the decision carries my full praise. Anna Bligh will have done a wonderful job to help the nation and Queensland.

But any coal gas back-down is totally illogical. Why should coal gas come under the petroleum act when coal itself does not? And why should coal gas be taxed differently to Olympic Dam uranium in South Australia which may be threatened by the RSPT? They are all rival fuels. Could it be motivated by the number of marginal seats in Queensland and the fact that it’s where Kevin Rudd and Wayne Swan are based? Surely not.

But back to exploration. The petroleum rent tax did not apply to existing fields and for a long period the North West Shelf gained concessions. But while the Rudd Swan tax stops the development of most existing deposits the petroleum tax is sufficiently generous to make economic the development of deposits that have been found – hence the development of the North West Shelf.

But the petroleum resources tax made it uneconomic for international companies to conduct wildcat exploration. Before the petroleum tax was introduced around 1987 all the world’s majors had isolated Australia as a highly prospective oil and gas exploration province with only about 80 per cent of the basins explored. Once the tax came, one by one they packed up and went to the US, West Africa and parts of South America. BHP Billiton followed them. That’s where the new oil has been discovered and developed and Australia now faces the prospect of a $25 billion hydrocarbons shortfall. (See Australia's oil deficit blow-out, May 31.)

Fortunately the Hawke-Keating government kept the North West Shelf alive and a quarter of a century later all Australians are the beneficiaries. But there is little doubt that without that tax Australia would now be a major oil province.

Let’s hope Queensland LNG goes ahead because at least we will have saved something. But as for the rest of the mining industry the exploration will go offshore and that’s where the next generation of developments will take place. Mike, his children, and his grandchildren will be much poorer. Matt and his partner are going to Canada.


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ody
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Wednesday, June 09, 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)



Interesting little up move at the end!

Some clear bullishness there. However, it just lifted the market into positive territory. The sectors I mentioned before, today, remained the favourites, so there was more intensive buying in them rather than that the pattern changed towards aggressives. Total volume was strangely low - probably a worrying sign in that it shows that not many people want to be in this market. However, up volume was slightly higher than down volume. But decliners outpaced advancers, and - in a pattern we have been able to see time and again of late - new lows far outpaced new highs.

This reads to me as a day which ended up just slightly in the green, but which in most respects carried - despite its fairly uneventful look - the character of an unimportant day in a bear market rather than on a bull market. For the most part it was not a day that offered much comfort, though the fairly good buying of defensives suggests that the market is not in free fall and that people have not totally given up on it. To the extent that the day was fairly uneventful that probably reflects the mood of Australians currently in that, for us, there hasn't really been much important "new" or "unexpected" news that would move the market one way rather than another. Certainly not a catalyst to move it up. And for much of the day the trend was bearish.


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p3t3
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Wednesday, June 09, 2010 - 07:28 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 wrote on Wednesday, June 09, 2010 - 05:31 pm:

Interesting little up move at the end


Our market followed the jump in Shanghai:

Shanghai shares gain on reported export surge

By Chris Oliver

HONG KONG (MarketWatch) -- The Shanghai Composite index rose sharply in afternoon trading, reversing earlier loses amid a report of upbeat export and loan growth data for May. China's exports were up by about 50% in May from a year earlier, according to a report by Reuters, which cited comments by a senior government official to an internal investor conference. Bank lending for the month totaled 630 billion yuan ($92.2 billion) in May, trailing April's 774 billion yuan in news loans, the report said. The Shanghai Composite Index jumped from negative territory to trade up 2.4% in a matter of minutes, following the report.


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ody
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Thursday, June 10, 2010 - 03:02 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)



(1) p3t3: I am sure that that Shanghai jump DOES explain the late rise in our market.

But the news is a double-edged sword. The info suggests that China is overheating in a major way: we want it to do well, but in a steady fashion. That is not happening at all!
And particularly unsatisfactory because much of the rest of the world, above all Europe, will not be able to import nearly as much from China as it used to. Nor will America with its huge unemployment, as that will reduce retail buying. So a first reaction to much activity in China sounds reassuring - but upon reflection it is by no means a good thing in a country where the authorities worry greatly (and rightly) about excessive growth, speculation, and overheating.

See also (2) below, which links in with this as showing the dangers of a global two-speed economy.


(2) Budget, super tax worry consumers

* Sid Maher
* From: The Australian
* June 10, 2010 12:00AM

Source: The Australian

CONSUMERS have rejected Kevin Rudd's budget and the resource super-profits tax, delivering a new blow to the government's economic credentials.

As the Prime Minister was confronted by angry miners in Perth yesterday, the Westpac-Melbourne Institute consumer sentiment survey recorded its biggest two-month fall since before the global financial crisis, and the mining tax was rated the most controversial government measure since the introduction of the GST.

The survey highlighted a negative reaction to the budget and the RSPT and fears about economic instability in Europe sparked by the Greek debt crisis.

It was released as Reserve Bank governor Glenn Stevens warned that a further substantial build-up in householders' debt in Australia could increase their vulnerability to economic shocks.


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ody
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Thursday, June 10, 2010 - 03:42 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)



This explains especially well why Rudd cannot extricate himself from the problems he has created: THE FIRST 12 BILLIONS HAVE ALREADY BEEN SPENT.
--------------------------------------------------
Stephen Bartholomeusz

Rudd's fiscal straightjacket

Australian Foundation Investment Company chairman, Bruce Teele likens the current government’s proposed resource super profits tax to Rex Connor’s economic nationalism in the 1970s, except that where as Connor and the Whitlam Government planned to nationalise resources with debt, the Rudd Government wants to do it through the tax system.

At a media lunch in Melbourne today Teele, the former chairman of JB Were, made constant references to the sovereign risk created by the RSPT and the government’s treatment of Telstra. A veteran of half a century in the Australian sharemarket, Teele said he had never seen overseas investors turn against Australia so quickly.

He referred to the ‘’strong-arm’’ and ‘’non-consultative’’ approach of the government and his perception of its philosophical preference for the public sector to be a bigger proportion of the economy.

Teele’s comments, like the rather more cautious intervention of the Business Council, the warning of the threat to Whyalla’s existence provided by the chairman of One Steel, Peter Smedley, criticisms of the process under which the RSPT was sprung on the sector by Infrastructure Australia chairman Sir Rod Eddington and Future Fund chairman David Murray’s view that the retrospective nature of the tax creates sovereign risk, point to a widening of the support base for the miners among the broader business community.

The more that develops, the more difficult it is for the government to say that the miners’ arguments are a scare campaign motivated purely by their desire to protect their super profits.

Teele also said that, while AFIC (as a listed investment company focused solely on Australian stocks) doesn’t have many foreign shareholders, one of them had sold out in response to the announcement of the tax, saying that they didn’t have to have an exposure to Australia.

That’s an increasingly common story, along with reports from Australian business leaders who say that in every conversation they have with offshore investors and companies the first question invariably relates to the RSPT and why an Australian government would want to damage such a significant sector as well as the reputation of the country as a safe and stable place to invest.

The government is already under real pressure to significantly amend or abandon the tax. [NOTE:] The difficulty it has is that it has already spent the $12 billion it expects to raise from the tax in its first two years. It can’t meaningfully reform the tax – and in particular it can’t excise the retrospectivity which is its most objectionable feature and the element that has driven the perceptions of heightened sovereign risk – without putting a $12 billion hole in its budget. [SIC]

It wouldn’t be able to go into the election with the swag of RSPT-funded promises it has already made and still be able to meet its promise that the budget would be returned to surplus in 2012-13.

For the moment, apart from mounting its own advertising blitz, the government, confronting the reality of a massive freeze in resource sector investment and employment, is being forced to contemplate excluding some projects (those that have no near term revenue implications) from the RSPT and making gestures like today’s promise from Kevin Rudd that he will return an extra $400 million of the many billions of dollars he would siphon from the West Australian mines in the form of infrastructure investment in WA. [IN OTHER WORDS: HE WILL TINKER IN AN UNPLANNED WAY AROUND THE EDGES.]

So, the Rudd government is now effectively locked into the tax in an environment where the European sovereign debt crisis is already creating turmoil in markets and pushing up the cost of borrowing in wholesale markets – markets Australia relies on to fund the current account deficit.

At a time when investors are already anxious and risk-averse, it has presented them with a layer of country-specific risk and given itself no real to manoeuvre to undo the damage. With what must have looked like a brilliant political strategy, the government has snookered itself.


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rdumas
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Thursday, June 10, 2010 - 08:52 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)



Progress of S&P500 Pattern

In my post 3512 on the 8th June I posted the following chart.



In that post I suggested that we were probably going to create another impulse wave from the label B and that we could use the proportionality of the waves in the previous impulse wave to gain some insight into the progress of the new impulse wave.

Note that in the first impulse wave the range was 59 points. At the time of posting the chart the range of the first wave of the second impulse wave was 56 points however subsequently this range completed at 64 points.

Checking the current status of the pattern we can now see that the S&P500 has completed the second wave of the second impulse wave and not surprisingly the ratios of the second waves to the first waves in each impulse are similar.




Should the pattern continue to play out then we would expect further down movement in this index for the third wave of the second impulse wave.


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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Thursday, June 10, 2010 - 10:20 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)



Great charts Rudy and I agree completely. The S&P is set for a big move down starting right about now.

I think that the current rally in our market - ASX200 presently 4410 will just about do it for us and I think we are about to start the next move down as well.

Our market has been currency driven and the AUD looks like it is going to make its move down toward 79c which will drag our index down as well.

Cheers
MM


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rdumas
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Thursday, June 10, 2010 - 12:35 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 MM,

Thanks mate. The following chart is what I suspect will occur to end the pattern. I can't be certain exactly where "z" will terminate but once it does, then the downward journey should 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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eblode
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Thursday, June 10, 2010 - 01:57 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,
From what you mentioned on the "wrap" it was around the 21st of June that we had to have a downward turn.

Eugenio


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market_mad
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Thursday, June 10, 2010 - 02:12 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)



Big bounce back up after 1pm today on the back of a Chinese Pension Fund chief saying that the "Euro can weather the crisis".... Well, all is ok then if someone from China says that!! I think they should be worried more about what is going on in their own back yard rather than making statements like these.

Got to love their rubbery figures that came out yesterday. Isn't it funny that Chinese data never ever disappoints to the downside - they either come in bang on expectations or blow them out of the water....

Unemployment data helping our market also today.

I think your 'Z' will terminate somewhere here Rudy.

Cheers
MM


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rdumas
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Thursday, June 10, 2010 - 02:27 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 Eugenio,

In my market wrap addendum sent out on Sunday I mentioned that Andrew believed that my suggested interim hign on the 21st June was possibly incorrect and that it was possibly a low. His date for a significant low in the XJO and SPX was between the 21st and 28th June. Based on the current pattern unfolding it looks as though he will probably be proven to be correct.

Timing is a very difficult things to pin down just as price levels are also difficult to pin down. In the case of price levels for example we can suggest Fibonacci target levels. These are potential turning point levels and the market must test these levels as they are approached. Many times these levels will be tested and found to be powerful enough to be the actual bounce level. On other occasions these levels are tested and eventually overcome. In these cases we then focus on the next Fibonacci level. The whole process is then again repeated. Eventually a level is reached which proves to be the level at which the bounce occurs.

The same thing happens in the time domain. There are periods at which a turning point is likely to occur. As with the price levels, these time periods are also tested and either forms the turning point or is bypassed to the next turning point period.

I should point out that the market moves in time cycles. Ignore totally price in this discussion, I am talking purely about time. Tops and bottoms will occur in a cyclic fashion where the current top will bear some relationship to tops and bottoms that occurred earlier in the cycle. It is because of this behaviour that we can on occasions be quite accurate in determining where future turning points will occur.

One of the things that occurs in the market on occasions in terms of 'timing' analysis is that the market goes through what we term an 'inversion'. When this happens, the market goes through an inversion and where it would have previously formed a low, it instead forms a high. This inversion process usually occurs at either the start or completion of a timing cycle 'series'. Once the inversion takes place the normal location of highs and lows continue on in the new series cycle.

It is because of this 'inversion' mechanism that occurs in the market that many 'timing' analysts will be able to tell you where a turning point will occur but not be able to tell you that it will be a top or a bottom.


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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Thursday, June 10, 2010 - 02:58 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)



Hi Rudy,

That fits better with my analysis that it would be a low point in the markets around the 21st of June as I believe that the US markets are just about to start a big move down.

Cheers
MM


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rdumas
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Thursday, June 10, 2010 - 03:05 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 MM,

You could be right there matey. As you can see the pattern forming on the XJO is quite different to that forming on the S&P500. It would be difficult to imagine however that if the S&P500 had a significant in a wave 3 down that the XJO would not terminate its wave z early.

If it did terminate early then it would be pretty bearish as quite often a wave z will actually overshoot the upper boundary of the complex wave channel (called an 'overthrow').

Whilst the 2nd wave in the first impulse wave on the S&P500 was not complex it does not mean that the 2nd wave in the second impulse wave cannot become complex. If our timing views are correct in that we may get an interim low around the 21~28 June, there is still time to meet the latter date however in order to meet the date of the 21st would require a move down to start in the very near future.

I personally have a leaning towards the earlier date as you do however have not discounted some buggerising around on behalf of the market.


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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hailoh
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Thursday, June 10, 2010 - 09:17 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)



Have a look at the Shanghai, Commodities Index and XAO charts in the China Markets thread. I believe there is a very useful picture there, with China leading the trio lower.


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bridog
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Energy related stocks going gangbusters on DJIA.

I have set a buy on a few stocks, but looking at US I doubt any of them will trigger.

Best buy in the market for conservative investors IMHO is TCL. As a toll road operator, risk is low/medium, pays 5% dividend but no franking credits unfortunately, and has a beautiful chart at the moment, heading north.







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rdumas
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Friday, June 11, 2010 - 10:34 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 MM,

As I mentioned in my post yesterday afternoon, if the z wave on the XJO did terminate at yesterday's close price, it would have been early because quite often the z wave will do an overthrow (ie, move above the upper boundary of the complex wave channel). As it turns out we may well do this today.

As for the S&P500 there are a couple of possible bearish scenarios detailed in the chart below. Whilst there are also some short term bullish scenarios, the wave patterns do not appear to be very convincing to me at this stage.



The scenario labeled with blue labels assumes that we are in the midst of wave 2 of that second impulse wave that I have been speaking about. This count would be invalidated if the current rally went above 1105.67.

The other scenario is that we are forming a larger corrective wave before the move down. I have labeled this scenario with red labels. In this scenario we would be forming a large Flat pattern and it could terminate anywhere near the 1105.67 level. Either above, below or at that level in fact.

Both scenarios would mean that once the current rally wave completed somewhere in the region of the 1105.67 level, the market would head south again.


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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