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Trade Trends with Bollonger Bands and Twiggs Money Flow

Archive through June 20, 2011

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through June 20, 2011

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rdumas
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Post Number: 4922
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Sunday, May 29, 2011 - 07:29 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)



Thanks Pete. Much appreciated and so are the many private messages received. I have also gained much from the production of the WMW. As you know the writing of such a document can often distill our own thoughts as well.

Add to this the wonderful and talented people that I have met through the exercise and it was no doubt me that benefitted the most however there are times when other things rise to the surface that need our attention.

(Message edited by rdumas on May 29, 2011)


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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cat_lady
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Sunday, May 29, 2011 - 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)



Hi Rudy

I echo the more eloquent responses of Ody and Pete - as I said privately sunday evenings aren't going to be the same! Thanks heaps for all your contributions to my technical education.

cheers
cat lady







Without my morning coffee I might as well be a dog

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rdumas
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Sunday, May 29, 2011 - 11:47 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)



Thanks Cat Lady.


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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billt
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Sunday, May 29, 2011 - 11:49 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)



hey Rudmeister,

Just tuned in to realise that WMW is wrapped....an A wave and a B wave and that's that!

Thank you for all the efforts in pulling together the WMW for so long. It has provided an education to many, but I claim to have learnt the most as I was starting with a completely blank canvas!

A word of thanks goes to Randall, Andrew, and of course mysterious 'Mr Fib' - without their collective input WMW would not have been the success that it has been. The legacy of course is that we have a 'Cycle' thread, an 'EW' thread, and of course a 'Spooky' thread to keep the educative process rolling for those new entrants to this unpredicable world.

cheers,

Bill


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rdumas
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Sunday, May 29, 2011 - 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)



Hi Bill,

You also hold the record for the speed at which you picked up the complexities of EW analysis so you can be proud of yourself. Most people take years and you seemed to pick it up with ease. Well done.


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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Tuesday, May 31, 2011 - 04:39 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)



From the ABC: not looking good!

Bears outnumber bulls among home [= Australian share-] investors

By online business reporter Michael Janda

Updated Fri May 27, 2011 4:58pm AEST

The bulls have been overrun by bears in the last couple of months (www.flickr.com: wallyg)

A bimonthly survey of home investor sentiment shows pessimists now easily outnumber optimists, while most investors are unsure of whether to buy or sell.

The survey of 2,000 members of the Australian Investors Association (AIA), which represents do-it-yourself investors (a majority of whom run self-managed super funds), yielded 400 responses.

55 per cent of those who answered were neutral about the Australian share market, which was similar to readings in January and March.

However, the association's vice-president Scott McKenzie says the big shift was a jump in the number of people who were bearish (pessimistic) about the market's prospects, while the proportion of bulls plummeted.

"The bullishness went from 31 per cent to 11 per cent in the last four or five months, and the bearishness increased from 15 per cent to 35 per cent," he told ABC News Online.

Online financial publication FNArena does a concurrent survey of its readers, and the 267 investors who responded were even more pessimistic.

Only 7 per cent identified as bullish, 41 per cent were bearish and 52 per cent were neutral - a big turnaround from the website's poll in March, which had bulls outnumbering bears.

Despite the rise in bearishness, 38 per cent of people surveyed by AIA still think the share market will be higher in six months, 31 per cent say lower, and 32 per cent say it will be about the same.

Among FNArena readers around half think the share market will tread water for the next six months.


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pjf000
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Tuesday, May 31, 2011 - 10:00 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,
Wallyg has nearly 9ooo photos


Go Pies!

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ehmu
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Tuesday, May 31, 2011 - 10:01 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)



S&P 500 bearish case and historical P/E ratios

http://www.slopeofhope.com/


_____ n a m a s t e

These musings are not a recommendation to buy or sell stocks.


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ody
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Wednesday, June 01, 2011 - 06:45 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)



A rally unlikely to get far??
---------------------------------------
Reuters

NEW YORK - Wall Street bulls took the upper hand as hopes for a new plan to deal with Greece's debt crisis soothed some investor worry, but more grim economic data suggested there were more hurdles ahead.

Based on the latest available data, the Dow Jones industrial average rose 128.21 points, or 1.03 per cent, to end unofficially at 12,569.79. The Standard & Poor's 500 Index was up 14.10 points, or 1.06 per cent, to finish unofficially at 1,345.20. The Nasdaq Composite Index was up 38.44 points, or 1.37 per cent, to close unofficially at 2,835.30.

Stocks, however, posted their worst monthly performance since August.

For the month, the Dow is down 1.9 per cent, the S&P 500 is down 1.4 per cent and the Nasdaq is down 1.3 per cent.
------------------------------------
The whole idea to take share markets up, overseas, on the basis of yet another bailout by Germany and other hardworking and successful European nations of an essentially bankrupt Greece, money spent on which goes into a bottomless pit, is ludicrous. It is a knee-jerk "comfort" reaction at the news that at least Greece will supposedly not default. The same dangerous strategy of not facing problems but obfuscating them by throwing money at them has greatly enfeebled and endangered the US, and it is sad to see that the EU just doesn't seem capable of doing any better. Of course, for that to happen, the whole project would ultimately have to be abandoned: if Greece were NOT bailed out it would default, with disastrous consequences in terms of the unity, coherence, and validity of the union. Stuck with the whole crazy scheme as they are, EU nations won't face so drastic a change, and would rather live with a sick European economy in which in essence the weaker countries fail, and the stronger ones get weaker by wasting their money on non-performers.

Meanwhile no other problems will go away either. This "euphoria" about yet another "Greek solution" is unlikely to see the markets through for long, and the worries which more and more people are at last beginning to feel about the whole strategy adopted by both the US and Europe (viz. "spending your way out of trouble") will see to it that share markets cannot sustain any rally for a significant period. People are not going to be hoodwinked by such lame, politically-inspired steps as a response to serious economic problems, or at least far less so than they were, for example, at the time that the Rudd government here was crazy enough to spend $50 billion which should have been kept (after perhaps spending the initial much smaller amount as an "insurance") for better and more necessary purposes. The times they are a-changing, and not in favour of the bulls.


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rdumas
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Wednesday, June 01, 2011 - 08:49 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 totally agree with the views expressed in your previous post and there is no doubt in my mind that the issues you mention will be amongst those that will cause the Primary wave C nightmare that will bear down on global markets in the coming couple of years.

For readers of my Market Wrap they will know that I suggested a final rallying pattern up into early to mid June to finish off the rally that started in March 2009. That final move up started on the 25th May. The following chart shows the progress of that rally in the context of the previous few weeks of price action on the S&P500.

I have put a red overhead resistance line at the North T Node planetary line mentioned in my last Market Wrap. That line should provide a (possible) temporary obstacle to the rally in the near future. Note that it coincides perfectly with an obvious overhead resistance to the index.




The following planetary chart shows that line and the following overhead resistance line at 1365 from the Saturn line at that level. Now whether these two obstacles prevent the S&P500 from making a new high before (what I consider to be) the inevitable start of the Primary wave C decline remains to be seen. Time is one of the critical components of any outcome and the index is quickly running out of that.





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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pjf000
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Wednesday, June 01, 2011 - 08:53 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,- "A rally unlikely to get far??"

What seems to be happening is that the can (Greece) keeps getting kicked down the road. The obvious question is not if but when the default will occur. It feels like it is imminent but who knows. In the meantime the markets are oscillating.


Go Pies!

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ody
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Thursday, June 02, 2011 - 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)



Huge fall on Wall Street

All that happened was entirely predictable, all along, as inevitable given the bad policies adopted by those responsible for setting them - notably (a) zero interest rates, (b) stimulating the economy by doling out money, (c) not tackling the problem of debt except by buying e.g. rubbish notes, (d) printing money. The truth is you just cannot buy your way out of trouble. By financial looseness and laxness the Fed and others have just made the problem WORSE since it first became explicit in a major way in 2007. And expect more evidence of all this, and don't trust American share markets, which are not built on any sensible solid platform.

CNN reports e.g.:
----------------------------------
The declines were the worst since last August for the Dow and S&P, while the Nasdaq's performance was the worst in nearly four months.

Stocks were under pressure right at the open following a dismal report on private sector employment, and the selling gained momentum after the U.S. manufacturing report was released.

The Institute for Supply Management's manufacturing index for May fell to 53.5, falling short of economists forecast for a 57 reading.

"Weak economic data has started to snowball," said Michael Sheldon, chief market strategist at RDM Financial. "Initially, we just had bad news from the weekly jobless claims data, but now we're starting to see a broad-based economic slump."

Late in the trading session, the slide in stocks got steeper as concerns about Europe's debt problems resurfaced. Moody's cut Greece's bond rating by three notches to Caa1, which put the debt-ridden country's debt even further in junk territory.


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ehmu
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Thursday, June 02, 2011 - 10:25 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 wrote on Thursday, June 02, 2011 - 09:26 am:

cannot buy your way out of trouble




The Americans have done a masterful job of distributing the pain to the rest of the world, don't you think ??

And this has been going on for two years now, I haven't heard any complaints. Criticism yes, lots of that, but no one is standing up to being fed oatmeal when they have earned prime rib, and all the trimmings.

Canucks are noted for their apologetic about everything, but I would have thought the Dutch, Germans, or those leather necked Australians would have set the record straight by now. This world reserve currency devaluation that is going on would have started wars in other eras.


_____ n a m a s t e

These musings are not a recommendation to buy or sell stocks.


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colin_twiggs
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Thursday, June 02, 2011 - 10:36 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)




ehmu wrote on Thursday, June 02, 2011 - 10:25 am:

This has been going on for two years now, I haven't heard any complaints. Criticism yes, lots of that, but no one is standing up to being fed oatmeal when they have earned prime rib, and all the trimmings.



Makes you miss Charles de Gaulle. Nixon had to leave the gold standard in 1973 because the French wanted to exchange all their US dollars for gold bullion.


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ehmu
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Thursday, June 02, 2011 - 12:12 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)




colin_twiggs wrote on Thursday, June 02, 2011 - 10:36 am:

US dollars for gold bullion




I believe that the Americans have been covering that base by purchasing gold silver and whatever else with their funny money.

When some of the countries that hold the materials start refusing payment in $US for the goods, then we'll see what level of suction the US can muster. Eventually their huff & bluff will jump up out of the weeds and bite them in the ............ (tender parts).


_____ n a m a s t e

These musings are not a recommendation to buy or sell stocks.


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pjf000
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Friday, June 03, 2011 - 08:35 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)



I wonder what happened to Bonkers and if he is still clinging to QAN


Go Pies!

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ody
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Friday, June 03, 2011 - 10:00 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)



Pif1000:

I think that anyone clinging to QAN in any way (flying, investing, or whatever) MUST be "Bonkers"!!!


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ody
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Saturday, June 04, 2011 - 05:38 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)



An interesting article

I don't altogether agree with Christopher Joyce on Australia's residential market, on which I think he is probably a bit too optimistic, but I think he is "bang on the ball" about fixed/floating interest investments. I hope this link may enable you to reach his piece. If not, I shall cut and paste ...

http://www.businessspectator.com.au/bs.nsf/article/fixed-interest-corporate-bond s-equity-returns-pd20110530-hc8n2?opendocument&src=msp


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rdumas
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Sunday, June 05, 2011 - 07:16 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)



Hi Ody,

I tried to access the site today but could not find the article you mentioned. I probably left it a day too late.


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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Sunday, June 05, 2011 - 08:04 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,

A friend of mine sent me the article via PM so have no fear I shall be reading it today.


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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Thursday, June 09, 2011 - 07:36 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)



http://armstrongeconomics.files.wordpress.com/2010/05/armstrongeconomics-an-outl ook-for-the-land-downunder-5-2-10.pdf

This is a link to Martin Armstrong's outlook for Australia, which I have just come across. He sees the All Ords topping out at about 15000 at about 2015, and the A$ at least up to $1.48 US and possibly $200 US.

He has been very accurate with events on dates in the past.


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ody
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Thursday, June 09, 2011 - 08:36 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)



A testing period

The key question will now be, I think, whether the XJO will dip below 4500, which would need to happen for it to persist convincingly with negativity. If it does, and heads downwards further, it will be on its way to 4200 as its next test.

It's an interesting time sphere we are in just now, and that is why I have decided to look at a few things and make a few comments.

First, I think we can perceive increasingly that investors, whether in or out of the market, have become more bearish. Not only is that obvious from many publications, but there is the performance of the share market itself to prove it, and an interesting survey to the effect that in January 35% of investors were bullish on the market, whereas now the figure is 11%. This is within Australia. It is extremely unlikely that overseas buyers are sufficiently positive to counteract this figure. So in general we might be in for a further decline, though people do not always act according to their opinions, and can change them very fast - one reason why share markets are so volatile (the market is moved not only by "constant" bears and bulls, but also - very importantly - by people who change their minds).

Today was actually a rather better day than most. While there was not much to inspire the market at the beginning of the day, the media are probably right to suggest that the disappointing employment figures (new negative data on top of others showing a reduction in economic activity and growth) may well have spurred the market on, in the supposition that the RBA will be slower to take interest rates up. However, conviction on that score would have to become a lot stronger, and to be supported from some hint or other from the RBA itself, for it to inspire an ongoing upward movement. As well, stable interest rates would result from awareness of a slowing economy, and would not necessarily produce a bottom. LOWER interest rates might stimulate the market, but would still be a sign of real economic malaise as perceived by a fundamentally hawkish RBA (inflation does remain what it looks out for, even in a slowing economy).

Furthermore, the market today actually behaved quite erratically, keeping open the possibility that it will fall further as much as staging a convincing rally. We MAY just see a turn upwards, but the signs are doubtful. The lowest point the market reached, viz. 4519, is still above 4500, but we got close. The day's high of 4557 proved unsustainable. At the end of the day we were at just 4549. And the second high for the day was lower than the first. Or, to put matters differently, the market seemed to meet resistance at around 4550.

It is interesting to "drill" a bit further into just what the market did. From the indices, I could not really conclude any clear pattern on the issue of defensiveness vs aggression. Banks led, but they had indeed been very low, so there was probably bottom fishing. Financials minus property trusts at 0.68% certainly did a lot better than materials (associated with aggression) at 0.23%. On the other hand, discretionary retail at 0.70% did very well, but the supposedly defensive staples managed only 0.03%. In general, people were probably buying stocks which they felt had fallen too far, rather than expressing a particular concern with defensiveness vs aggression.

But how many participated? Trouble for bulls (but also for convinced bears!) was that volume was rather thin at 2,452,601,648, of which only 40% was up volume, while 43% was actually DOWN volume. Advancers exceeded decliners, but not by much, viz. 37% by 35%. And very bearish was the number of new lows, at 105 versus 19.

My impression, then, is that there was some active buying, probably of a "dip", in the eyes of short- or long-term optimists, but that the amount of buying was not impressive enough for it to give one the feeling that we are, at least at this point, seeing the beginning of a rally, which I would in any case not see as achieving anything meaningful unless it developed real and sustainable power. On the other hand, it could well be that 4500 will offer comparatively firm resistance.

The general TONE of things seems to me bearish, so that, although 4500 may very well be a hard barrier to get through, it is not at all impossible that it will be "taken out". And I certainly do not see much convincing evidence of upside.

However, while of course the market has been correcting (there can be no doubt about that), it is not yet the case that we can definitely call it bearish, as 4500 has not yet been tested, leave alone 4200. And only if 4200 proved a thin barrier and if THAT were to be vanquished would I see the market as being in really deep trouble. But while I am cautious on claiming a victory for bears, I am not at all optimistic on an upward move, and I would wish to see the market a lot lower than this before I'd begin to find it attractive for going long.


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ody
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Thursday, June 09, 2011 - 09:02 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)



Market bottom near?

Ken, the following is from Wikipedia.

"In the United Kingdom ... a popular financial magazine Money Week published an article on Martin Armstrong on March 27, 2007, titled "The strange case of the jailed market genius". In that article they highlighted the model had predicted a major top in financial markets for February 27, 2007, with the next major bottom being June 18, 2011."

The TOP actually came quite some time AFTER February 27, 2007, viz. in November. And there really were quite a few people foreseeing the top in 2007 as well as the bear market sure to follow. Armstrong's insight was not only out by a fairly long stretch in time, but nothing remarkable in predicting a 2007 top. The major BOTTOM supposedly occurring on June 18 had better hurry along fast. I must say I would be ASTOUNDED if we went below the March low of 2009, which was if I recall correctly 3100.

In short, while undeniably Armstrong gets some things more or less right, I would not see him as a particularly accurate forecaster. However, although 2015 is a long way out yet, which would lead me, for one, to be very careful about making any definite forecast for so distant a date, I would concede that it is VERY well possible that some years from now we shall indeed see a huge high for the ASX. That would result from pressure arising where the demand for commodities produced by Australia becomes really big, while it cannot be met sufficiently quickly and well by Australia and others to keep prices as low as we might currently envisage them to be. And the high dollar would be part of this movement - the relationship between our currency and our commodities has repeatedly proved very strong.

So, who knows? It is conceivable indeed that a number of years from now - and perhaps not even that many - demand for our commodities will truly soar, while supply just is not big enough to meet it. Currently this is not yet seen as an immediate prospect: rather, people are worried about the second stage of the GFC. But it is certainly going to be a good idea to keep a very open mind about how the future will unfold.

As Armstrong has a tendency to be too early with his forecasts (even those which in principle are correct), it would be possible to envisage a bottom some time well beyond 18 June if that bottom is to be below 3100, and maybe the top will be later as well. But it is difficult to see, in any case, how much faith we can have in his timing given that in 2007 he predicted a bottom for 18 June of this year - just a few days away - which is surely very unlikely to occur.


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gdd3
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Thursday, June 09, 2011 - 10:28 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)



"Market bottom near"...well of sorts, yes!

XAO/XJO...almost the same "picture"(as you would expect) appear to have found a low of some sort , i.e. if we(T/A's) believe "history repeats". Below is a chart for the XAO which highlights(on a close basis) that yesterday's close(today's open) was only 1 point lower than the March double bottom low...i.e. 100% retracement on a close basis. Both double bottom(??)lows are distinguished by "tweezer" bottoming candles; another positive sign albeit may be only for a short-term move. In addition, the TMF indicator has been 'diverging' since May 25(actually May16)swing low and has now crossed back above the 0% but more importantly just a short distance away from breaking its downtrend resistance line(yellow). The previous two similar situations(break back above the 0% line and above its downtrend line are shown in green)resulted in good countertrend moves....so just may be history is going to repeat and we are seeing the beginnings of at least a counter-trend move starting from these levels.

In for a penny in for a pound!




Cheers
Dolphin


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ken
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Thursday, June 09, 2011 - 10:34 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)



Ody,

He makes the point that the model is global and not limited to one market. Also the major highs and lows are more reliable for something significant to happen. Examples he gives (the dates are in the form of years with two decimal places)

1985.65 - Birth of the G5 in response to the pound falling to $1.03 US

1987.80 - 1987 crash

1989.95 - Tokyo market peak, end of communism

1994.25 - Bottom for S&P500

1998.55 - High in Dow before 2000 point drop for Collapse of Russia

2002.85 - Near major low in Dow

2007.15 - Nikkei, debt markets and US economy

2011.45 (13 June 2011, next Monday) - ???????????


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ken
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Thursday, June 09, 2011 - 11:18 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)



Dolphin,

Remember that many of these events have been panics of one kind or another, including the '87 crash. Tuesday's bottom (Monday holiday) could be much lower??

I'm out of the market for personal money and thinking about it for the remainder of my super shares.


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ody
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Thursday, June 09, 2011 - 11:33 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)



Next bottom?

It would, of course, be quite possible, as Dolphin argues, to see a bottom as having already formed at this point and a rally to follow. On the other hand, Ken, I can only grant that of course it is possible that on 13 June, or 18 June, or whichever date is close, we MIGHT see a significant collapse. For example, if the market were to fall in New York from here on because people fear there will not be a QEIII, and that there is a lot of bad news holding the US economy back, with little prospect of Bernanke creating another magic pudding, then they might - particularly after a weekend of fear - start selling Wall Street down significantly.

I would not rule that out, with the emphasis on the word "significantly". But for us to make a NEW low, we would first have to go back to the March 2009 when here in Australia our market reached 3100, and either we'd have to be at the same level and THAT would then provide a turning point, or we'd go yet lower. (I am trying to think in tune with Armstrong; and I did go to your link.) My point is that in any case we'd have to reach a minimum of 3100, and either on the 13th or the 18th of this month. I do think it is a long shot.

I am not ruling out a return to 3100, but I would be surprised if we got there by the 13th, for example. The 18th might be more possible, though it would still strike me as very surprising if it were that soon.

Admittedly, such an event might be very healthy. It might help people to realise that the much-vaunted Bernanke-created "recovery" is a sheer myth, and that they are in very deep trouble indeed. It would produce a shake-out worldwide, and we might actually come to "rebuild" in more realistic fashion. I think it is also likely that if we did sink to those levels there would soon - or at least fairly soon - be buyers.

But I doubt that it will all develop that quickly. Much more often, if things do not improve within such a time-span as we've had since the end of 2007, a longer period would be needed. I would have thought that there is a real possibility of further misery for a more prolonged period before markets TRULY go up again. I don't mean that markets would go down and down and down - rather that if we look at a likely scenario, it would probably not be one whereby we go down to 3100 or lower by 18 June, and then race back up again, all the way to 10,000+ for our market. Things often do need more time between highs and lows, during which there is then protracted stagnancy.


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ody
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Thursday, June 09, 2011 - 11:52 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)



1987 and now

Ken, you are right in thinking that bad sell-offs are often the result of panic, and I've seen things go down very fast very quickly, with 1987 being the first big fall which I lived through as someone who had shares and fortunately sold out in a big way before the crash arrived. To my mind, 1987, or 2007 for that matter, cannot really be compared with our situation now, to the extent that prices were in both cases at a ridiculous height and really did have to collapse in a very big way. So, in percentage terms, I would not expect the market to fall AS badly as it did on those two occasions. Even so, I grant we could, of course, see a significant sell-off and even within the near future, if people did start panicking. But in that event I would have thought that, probably, a move from the current 4550 or so to 3100 would "do the trick". At 3100 I would think that the Australian share market would almost certainly be seriously undervalued, and I'd think of buying. Reaching that level would already be a truly shocking event to most people, yet we have been down to 3100 from a higher level before, and 4550 does not look at all as high a valuation as 6800 was, for example. Admittedly, 3100 would shock the hell out of the many people who were expecting great things for the share market this year! Like you, I am not holding any shares, except for ASX-listed interest rate securities, which would no doubt also go down, but which would nevertheless be on the whole safer than many direct-equity holdings. Even so, and because I don't trust this market, my exposure to these investments is less than 50% of what I had a number of weeks back. I did use the money I had in what were mostly hybrids to buy bonds instead, which are safer and less volatile. And more than 50% of our money is in deposits or direct cash. None of it is in "real" shares.

I cannot deny that I found myself thinking earlier today about the possibility of selling yet more hybrids, and simply sitting on the increased cash I would then have. And I am not remotely interested at this stage in buying "real" shares. I'd certainly want to see the market lower, because I think that many investors are still living in cloud-cuckoo land.


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ody
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Friday, June 10, 2011 - 08:05 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)



From Bloomberg this morning - a different story ...

U.S. equities rebounded after the S&P 500 slumped 6.2 percent from an almost three-year high at the end of April through yesterday following disappointing data on jobs, manufacturing and consumer confidence. The slump left the index trading at 12.1 times forecast earnings for the next year, the cheapest since last summer, according to Bloomberg data.

“We’re due for a rally after miserable stock performance,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. “People have been focusing on the negatives and have not been emphasizing the earnings momentum. Some stocks present good values again. It’s a good environment for investors to be positioning themselves.”
S&P 500 Rebound

The S&P 500’s rebound followed a 4.9 percent slide over the previous six days. Earnings are forecast to grow 20 percent this year for S&P 500 companies on 9.8 percent revenue growth, according to data compiled by Bloomberg.


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ken
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Friday, June 10, 2011 - 09:28 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,

Thanks for your considered replies.

If you read more widely in Armstrong's writings, you will see that he never makes out that it's all about the share market, and it's global in terms of territories and also types of financial parameters. He also doesn't necessarily know what it will be, just that it's a turning point in confidence in either the private sector or the government somewhere. Given his warm outlook for Australia, deciding whether he is right based on getting the Allords to 3100 is not relevant.

He mentions our major low being in the 1980's, and I can remember high inflation and Aussie Bonds (Retail $5000 government bonds) at 14% interest. Also the Pyramid building society in Geelong that was offering 17% and went bust, throwing Geelong into depression. That was the major crisis, not the low in the All Ords.

So I am expecting a panic that causes a low in some parameter somewhere in the global economy, either starting from the level on 13 June or (less likely) crashing or a crisis on that day. Whatever happens whenever may or may not directly affect our markets but easily could.

Hope this all makes sense.

Ken


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ody
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Friday, June 10, 2011 - 11:32 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)



Ken: Armstrong about the All Ords

Do you actually read the statements you post, Ken? In Armstrong's own statement, to which your link directed us, he tells us, under the heading "AUSTRALIA ALL ORDINARIES", that

"IT APPEARS THAT THERE WILL BE ANOTHER RETEST OF THE 2009 LOW, BUT AS LONG AS THAT HOLDS, WE SHOULD BE LOOKING AT A DECENT RALLY MAINLY BETWEEN 2011 AND 2015." (MY CAPITALS, TO MAKE THE QUOTE CRYSTAL-CLEAR.)

You will see from this that contrary to your own assertion it is ENTIRELY relevant to consider the question of whether 3100 will be reached. Armstrong refers to the 2009 low, when we did reach 3100, and he says that as long as that (i.e. 3100) holds, we should be looking at a decent rally [etc]. And this is SPECIFICALLY about THE AUSTRALIAN SHARE MARKET. Furthermore, in 2007 he mentioned June 18 as the likely date for a (wider) fall, whereas now it is the 13th: I am not blaming him for shifting his dates a little, but clearly he can be seen as believing that the 2009 low of 3100 will be retested during the period 13-18 June, or at least as from those days on. Anyone who can read can see this, and it is an enigma to me why you would seek to argue otherwise. Armstrong HIMSELF directs our attention to what he says WILL be "another retest of the 2009 low", which was 3100. And he himself expects a rally to follow that low, as from 2011 (where the low would occur in mid-June). It is in no sense irrelevant, in considering someone else's words, to consider just what he says. Nor is it irrelevant, in such a case, to REFER to just what he says, etc, etc.

I am, accordingly, going to see whether we WILL test the 3100 of March 2009 shortly, and if that does not happen, my faith in Armstrong's credibility will be affected accordingly. When people make these bold predictions, I hold them to their words. I am sure many other people do the same. Mind you, even if he is wrong in the very short term that does NOT mean that the 3100 will not be retested: that remains still quite possible. He is by no means the only guru who is preoccupied with that notion, either.

But let us be quite clear about what he is saying. You cannot say he is not saying something which clearly he IS, in fact, saying. Or, if he himself finds it relevant, to say that it is irrelevant to consider what he says.

Many here will not primarily be interested in the 10,000 or so which Armstrong sees as coming up in 2015/6: PEOPLE WILL FIRST WANT TO DECIDE WHETHER THEY SHOULD STAY IN THE SHARE MARKET *NOW*. OR FOR WHICH ENTRY POINT THEY SHOULD WAIT, ETC. Here, again, the question whether or not we are heading for 3100 if obviously of the utmost importance.


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ody
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Friday, June 10, 2011 - 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)



A statement which COULD be right about today

... and perhaps some more days to come:
-------------------------------------
"We're in a situation where a lot of our stocks have been pushed down to pretty low valuations and whilst there are a lot of reasons to be nervous about the world, we're in a situation now where people don't want to be left out of what could be a significant bounce," CMC Markets chief market analyst Ric Spooner said.

"So it's just valuation-buying and bargain-hunting, I think."
-------------------------------------


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ken
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Friday, June 10, 2011 - 12:53 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,

I admit that I had missed some of what he wrote and not put it all together like you have. I have been reading his explanation of his model in another paper. Certainly 3100 either on or following next week is a possibility in his prediction.

However what happens next week may be something entirely different somewhere else, like Europe or the US, and could be bank failures, exchange rate crisis, interest rate peak or whatever.

PS Capitals in internet messaging/posting is like yelling, not emphasis


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ody
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Friday, June 10, 2011 - 02:26 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)



Ken: capitals

I am sorry if they looked like "yelling" to you - they are really the only way I know how to do what in Word I would do in bold or italics. Certainly I did not intend an effect like yelling.

I do understand that Armstrong is interested in global financial situations rather than, normally, just one - but what you posted was specifically concerned with Australia, and it is that piece by Armstrong which you drew attention to, as well as commenting on where the AUD and our market might be, acc to Armstrong, in 2015-6. So that is why I addressed the matter with respect to our own share market.

Somewhat amusingly, I have just received a request from Huntleys' to subscribe to their newsletter, which I don't intend to do, but I noticed with some interest that Huntley in December 2009 said that an "All Ords close to 10,000 by the end of 2016 would not surprise", to which however he added that, at that time (late 2009), "My most favoured case is that we will see a sideways to down stock market". That latter prediction was actually very accurate (again, not unique, but some forecasts are better than others, even so). It will indeed be interesting to see what eventuates by the end of 2016, and Huntley points out - now, too - that such a rise would not be at all unusual.

I agree that we could well see it occur. The fact that we aren't remotely there at present and that in the world at large things look gloomy does not in any way mean that they cannot change drastically over 4-5 years. For now, however, I think that most people are far more interested as to how they will fare as investors during the next year, or possibly the next two years - and too concerned with those more immediate prospects to think much about the longer run. And concerning that longer run I would think that a majority of people would probably believe that even if we got a bad period during the next two years, eventually China and Australia will probably see boom years again. That is why I see nothing remarkable about Armstrong's projection for 2015-6, although I'd always be wary about the timing. In my own experience, it is usually much easier to see *what* will happen than just *when* it will do so. Personally, because in relation to major events I usually see correctly what is ahead, I tend to assume that it will occur much sooner than in fact it does. In 1987, already, I was well and truly out of the market when lemmings were still buying enthusiastically, and in 2007 I sold off a first small portion of our shares as early as February. At the end of July 2007 I thought the crash had come. And I would have expected the 2009 rally, which I did foresee, and on which I already embarked late in 2008 (i.e. ahead of time), to have finished well and truly by now. In terms of timing, I cannot actually remember a time when I so strongly expected the market to turn down and when it just dragged on and on not doing so!!


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ody
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Friday, June 10, 2011 - 11:36 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)



Just how small a gain is that?

Yes, the market was in the black, but although advancers outpaced decliners, there were several more lows than highs, down volume was considerably higher than up volume, and the total volume was very thin. This hardly looks like changing the overall picture, though one must admit that for the moment the slide has been halted by just a bit. But this remains an unattractive-looking market. There certainly is not enough buying volume currently to sustain the market at anything like a comfortable level.

Several other share markets are currently in the red. Europe is doing badly, and a short while ago Wall Street was almost 1% down. Currently it looks as though for the moment the ASX *may* have bottomed, but if present indications from abroad are any guide we could well see more negativity next week. Various technical indicators that I read about in the US suggest that appetite for risk there is sharply diminishing, and it looks as though Americans and others are looking for cash rather than assets, including gold.




(Message edited by Ody on June 11, 2011)


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pjf000
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Saturday, June 11, 2011 - 12:13 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)



dow down 120 in early trade - looks ominous


Go Pies!

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ody
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Saturday, June 11, 2011 - 06:38 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)



Europe and US down considerably

The falls were usually about 1.5%, but some a bit lower, and some higher. It certainly was a bad night (day, there), and not least because the same markets have been weak for some time. So ... it now looks as though more selling next week would be quite possible. The extent of the selling is certainly not evidence of a panic yet, but quite a few of those selling in the last few weeks are probably exiting the market, and if anything like this continues then very soon much larger numbers might do so, in which case escalation would not be off the cards. Let us remember, though, that it would really take serious panic for our market to go as low as 3100 within a very short time. I remain unconvinced that Australians are taking such a dim view of their economy that they will readily sell the market down to *that* extent. But, certainly, what is happening is bearish in nature. For our own market, we would first have to see 4500 taken out (and we are above that), and then - if that barrier does disappear - 4200 would be the next stop. I would predict (even if rashly!) that resistance at 4500, and certainly 4200, would be real: a break through 4200 would be very serious, with no real protection below that. And, if one takes a negative view, we are only a few hundred points away from that barrier. The selling in Europe and the US could easily lead to Australia getting sold off by about 1.5% or even 2% when the market opens - though that, by itself, would not yet establish a definite downward path. What is becoming less likely, now, is that our market, which looked like slightly moving up, will do so when it next opens.


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rdumas
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Saturday, June 11, 2011 - 08:31 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)



Hi Ody,

I share your negative outlook for global markets. I'm not sure about the US market which is more than capable of living in 'cloud cuckoo land' for long periods of time but I feel quite confident that the XJO has seen the market top at 5025 and won't see it again for a number of years. I have just posted my thoughts on the SPX in the EWW thread.

In similar fashion I would anticipate a temporary bottom for the XJO to occur late next week. This should lead to a second degree bounce which should last 7 to 14 trading days. I don't say this to give hope to the bulls because in my opinion it will still only be a counter trend to the main trend which is down.

Anyway, I thought that this week's Chart of the Day article was worth posting so here it is.

Chart of the Day

Declining real estate prices continue to be a concern for investors. For some perspective on the magnitude of the decline in home prices, today's chart presents the median single-family home price divided by the price of one ounce of gold. This results in the home / gold ratio or the cost of the median single-family home in ounces of gold. For example, it currently takes a relatively low 106 ounces of gold to buy the median single-family home. This is dramatically less than the 601 ounces it took back in 2001. When priced in gold, the median single-family home is down over 80% from its 2001 peak (to a level last seen in 1980) and remains well within the confines of a six-year accelerated downtrend and continues to close in on its 1980 trough.






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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billt
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Saturday, June 11, 2011 - 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 Everyone,


Something to chew on.....



Over on my ETF thread, Hal & I have been keeping ourselves amused riding this correction south on our ‘shorts’.



‘The Rudmeister’ referred earlier to the top of Wave B being reached – I sense it has already occurred too, and $IUX (US Small Caps) is possibly about to free fall, with wave 3 possibly already underway.

For those that may not have spotted it, I posted a thought on $IUX (US Small Caps) which may be of some interest, as it may have a direct impact on our little Aussie Small Caps too….here is a modified extract:


“There has been a 16/17 day cycle on $IUX repeated for over 12 months. The next turning point is 20/21 June. (..’give or take an Armstrong’…) Now that turning point may be a ‘high’ or a ‘low’, but assuming it is a high - that may pick out the top of ii-[3] on an EW bearish count.

If that next 16/17 day cycle point is a ‘low’, and the bearish trend line stays intake,....we could be heading for a substantial correction in a very strong i-[3] move! A year of gains wiped out in a matter of days.....

…and a further +50% rally on TZA to tally +80% in this 17 day cycle? A possible significant additional forex gain to boot!”



$IUX closed the week in a zone of strong support @ 777, so both options are still possible.

Rudy has just suggested on EWW a turning point of 16 June, which makes me somewhat concerned on how far we might drop next week before any conceivable rally...as usual, I will be trading both sides of the equation whatever is the outcome.

If this 'big dip' is not this month, it may well be next...just a matter of 'when' not 'if' to my mind. $IUX to target the March 09 low in a Flat Wave C.

With the China residential bubble looking more and more like a bubble bursting, and with GDP everywhere on a sharp reversal, I cannot see too many great days ahead for XJO...


This Polar is getting Bearish....







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ody
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Saturday, June 11, 2011 - 01:14 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)



Great posts, Rudy and Bill.

Thanks. As you imply, Rudy, there is always, however briefly, likely to be a rally (or a fall) going against a main trend, and it is important not to be misled by that. Such a reaction is simply fundamental to the ways of the share market, which never goes in a straight line for long, but is always "voted on" by bulls and bears having opposing opinions, and also simply likely to be pushed up when seen as "too low" or down if viewed as "too high". What matters is that we should get the main trend right, and that would seem to be getting clearer, in essence, all the time, if we look at several days/weeks (and longer) rather than just one day at a time.


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ody
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Sunday, June 12, 2011 - 03:13 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)



ROUBINI PREDICTS HARD LANDING FOR CHINA IN 2013

That would be a remarkably bad year for Australia, which may in any case find the going tough enough, at the present rate, until then ... I provide the link here. If you have any difficulty: I found the article on Bloomberg. It makes for very interesting - and very logical! - reading, as Roubini usually does. He does not get everything literally right, but he gets most things BROADLY right, and it is, I have found, very wise to pay attention to him. I did so from the moment he predicted the 2007 crash, so that I was on the lookout for that well before 2007. Link: http://www.bloomberg.com/news/2011-06-11/china-economy-at-risk-of-hard-landing-a fter-2013-nouriel-roubini-says.html


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ody
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Sunday, June 12, 2011 - 03:18 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)



Futures for our market are currently down by 44 points

And we are not trading on Monday. If Monday proves bad on international markets (particularly New York), then we could even go down by more. Admittedly, the reverse is also true, and the 44 points are not necessarily a good indication. However, most share markets performed badly on Friday, world-wide, and most have their futures down for the week to come.


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rdumas
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Sunday, June 12, 2011 - 08:04 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,

The Roubini article is very much in keeping with what I see in the technicals of the Shanghai Composite.

The index is forming a classic EW contracting wedge. Now it depends on where you draw the lower boundary of the wedge as to whether there is one last leg up to test the upper boundary (shown in red with red labels) or the index has already completed the pattern (shown with blue labels). Either way, the following decline will create havoc with this index that will take 2 or 3 years to complete. As you can see from the severe decline that preceded this corrective pattern, the downward trend is far from over and could restart with gusto.






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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Sunday, June 12, 2011 - 11:44 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 - Roubini and falling markets

Yes, that looks all very convincing ...


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ody
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Monday, June 13, 2011 - 12:57 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)



Monday, early afternoon: Asian share market almost all in the red. Not panic buttons or really big selling -but negative, all the same.


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rdumas
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Monday, June 13, 2011 - 03:51 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)



Hi Ody,

You may be interested in the following article:



http://www.bloomberg.com/news/2011-06-11/china-economy-at-risk-of-hard-landing-a fter-2013-nouriel-roubini-says.html


It is my view that the global markets will tend to bottom in 2013 the timing of which is a bit at odds with what Roubini is suggesting.


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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Monday, June 13, 2011 - 05:02 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: Roubini article

The piece you have posted today, Rudy, is the same one as I posted before, about which you said: "The Roubini article is very much in keeping with what I see in the technicals of the Shanghai Composite." Is this no longer the case?? I'm a bit confused.


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rdumas
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Tuesday, June 14, 2011 - 07:14 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)



Hi Ody,

Talking about 'having a senior moment'. I obviously read the article with 'fresh eyes'.

The sentence that appeared to put my timing at odds with Roubini's was "China’s economy may face a “hard landing” after 2013 as government efforts to boost growth through investment cause excess capacity, Roubini told reporters after his June 11 speech."

The emphasis is on the words "after 2013". These suggest that things would get worse "after 2013" when it is 2013 that I anticipate that the market will reach its low point. On reflection this is probably not at odds with what I said because as the market is a "forward looking" instrument it is quite likely that the worst of the economic woes would be built into the price by 2013 even though the worst was yet to come.


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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ehmu
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Effects of another credit contraction??

I am interested in hearing especially from those of you that have fundamental backgrounds, how risky you feel another credit contraction is to the equity markets.

I only have a gut feel that all equities (precious metals, share markets, futures, bearish etf's, and even possibly money markets) experience the same downward pressure when a credit contraction occurs. I think this basically is when the world banks decide the risk is too high for them and they reduce leverage, putting selling pressure on everyone that trades on margin.

Thanking you in advance for your comments and insight.

ps
My main worry on this subject is that many traders are tricked in to believing that trading the short side is somehow safer (lower risk) than the long side at this time. IMHO they too will be burnt by this phenomena if it occurs again.

Fundamentally, what is the likelihood of another flash crash for example (to use a coined expression for credit contraction) ??







_____ n a m a s t e

These musings are not a recommendation to buy or sell stocks.


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p3t3
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Monday, June 20, 2011 - 07:01 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)




quote:

ehmu asks : Effects of another credit contraction??




Looks like I get to do first offering by way of response -

Yes, your gut is right - a credit contraction would usually be expected to have a deflationary effect on all asset prices.

As credit conditions tighten leveraged trades, such as those using broker-offered margin and the US$ and JPY carry trades are amongst the first to be unwound. Broker-offered margin affects equities, though the effect can be spread or ameliorated by the variety of derivatives on offer these days : CFDs, exchange traded options, single stock futures.

Carry trades being unwound can affect a much broader range of asset prices, including property, commodities, precious metals and even collectables.

The deflationary effect of a sudden credit contraction was clearly on display in 2007/08 after the Lehman Bros collapse. Not many asset classes escaped that sell-down.

Just my view
p3t3


It's not about how good you are....
it's about how bad you want it

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