SPI Trading Weekly Report 30th Dec 2007

Above is the Weekly chart of the Australian Index Cash Market.

The Index XJO has been in a sideways pattern for a number of months now, but with the end of this year, the Yearly timeframe will shift major levels in the market. 2007 resistance will disappear and any major advancement in 2008 will be upwards over the next 6-9 months.

The Yearly Balance point @ 6224 is also going to be a very important level for trend direction in 2008:- below and my view is a gradual slide back into major support and a ‘double bottom’ for 2008.

SPI Futures:-

The above chart is the Weekly chart of the SPI Futures. We can see that the price action over the past few months has been guided by the Dilernia Model, as it moves between support and resistance defined by the Monthly timeframe.

With price still trading below January 50% level, then the overall trend remains ‘weak’:- and if it follows a 'Dilernia Principle' then it can easily move down into January lows.

Dilernia Principle:- 2 month wave pattern defined by the monthly 50% level.

Last weekly report I was looking for a 2-day reversal back down from the Weekly 50% level @ 6377….

Weekly Report 22nd Dec:- “ A failure around the Weekly 50% level, will be part of the rotation back down after the change of 3-day cycle… I favour at least a 2-day rotation-stall before any up trend is going to occur”

This occurred with the 3rd day rising from a precise BUY zone of 6295.

If this market is going to continue upwards then it needs to break and close above 6392:- Monthly BP.

The monthly BP allows traders an idea about how ‘Strong or Weak’ the Weekly trend is within the current Month. With January opening below 6392, then the first stage needs to move and close above this early next week, otherwise it’s going to move back down and test the Yearly Balance Point:- 6224.

Regardless of price action in the Australian Market, it is going to be heavily influenced by US markets and how they re-act to their own Yearly BP.

In conclusion:-

Taking a pure technical view of global markets, 2007 stopped rising higher because most markets hit Yearly highs, stalled moving into a ‘consolidation-period’ for a number of months.

The Shift in the yearly timeframe will allow global markets to rise higher because resistance disappears. This rise higher can take 6-9 months to complete.

The trend guide is going to be simply defined by the Yearly balance point, because in nearly 5 years this is the first time that the SPI has come close to this level, and below this level the expectation is that the Australian market is moving into a double-bottom around 5700.

This favours the fundamental view of global economies, as many are predicting the US is moving into recession.

However, if it does move down but follows the higher timeframe Dynamics, it could take a number of months for price to zigzag its way down to this level in 2008.


Please refer to the Daily report....

Note:- Rumour is that SPI futures in 2008 might be dropping down to $10 per contract from 25$. I can understand this with the influx of CFD operators taking a chunk out of their business.

SPI Trading Weekly Report 22nd Dec 2007

This Week’s price action was ‘classic’ text book stuff….

A break of December 50% levels, support disappears, and price heads straight down into the December support.

3-day consolidation pattern, and the break of the 3-day highs, changes the cycle and the market rotates upwards.

Even when we look at the monthly timeframes before, it all fits in nicely with Time and Price analysis using the Dilernia Model:-

October high-reversal, November 50% support-rotation, December 50% break-down, December lows support- rotation.

Next Week:- Trend will be decided by the Weekly 50% level @ 6377..

Above and price is moving back upwards to close the ‘Weekly Gap’, and then be defined by January’s 50% level.

A failure around the Weekly 50% level, will be part of the rotation back down after the change of the 3-day cycle. There is such a large gap to the 3-day lows, that I favour at least a 2-day rotation-stall before any up trend is going to occur.

But that will be determined by price trading either side of the Weekly 50% level


When we look at the trends within the Monthly timeframe, the 3-day cycles clearly define the direction of the markets, along with certain timeframe levels, that act as support and resistance.

Trading is simply about support and resistance, and by looking at this chart, it all looks so damn easy. But in reality it’s not easy, especially if you are a day trader.

For example:- a swing-position trader on stocks would understand that once December 50% levels broke, Buying into the markets was open to RISK, that is until the December lows are reached. Once support is reached, it’s the most logical level to be BUYING into the market. Much more so once the 3-day highs break.

Day-trading futures is different, because there are so many factors that need to be modelled to minimise Risk. And certain factors need to align perfectly for Reward to be maximised.

For Example:- I modelled this entire walk forward scenario in last Week’s report, but Monday didn’t align for me to short the market, but I understood ‘risk’ on that day not to be doing anything once the 5-day lows broke. And every other day was the same.




Come Friday, and I had modelled for prices to move higher and break the highs, but firstly I wanted to see ‘gap closure’ @ 6202 or a 44 point reversal in the market for me to trade ‘longs’.

That 44-point reversal didn’t occur until it was above the 3-day highs, and the
44-point reversal aligned with the break. That was my first long on Friday.

44-point spiral points are important risk levels in Daily trend direction; they are extremely robust entry levels because it is closest to your ‘stop’ loss point, but on occasions they fail.

On Thursday, the entry level ‘LONGS’ was around the r87 lows @ 6182.

Once I exited the trade, I wasn’t going to enter another long until there was a 44-point reversal. That did occur @ 6210, but it failed.

When we look at the R22 ranges, the R44 occurred below the R22 3-period cycles, that is why I partial exited just below the R22 break, because follow through had much less probability, and ran breakeven stops and didn’t trade again that day.

Whereas Friday, the R44 occurred above the R22 cycles, this R44 reversal had a much greater probability of follow through.

And the same applies trading short-term 11 point moves within 22 point ranges, probability occurs when trading in the direction of the cycles….

In conclusion:- The Dilernia model clearly defines market dynamics, trends, cycles, support and resistance, and also the likely path price will travel.

But, day-trading the Dilernia model, won’t always align with certain risk filters and probability patterns, whilst on other occasions it will provide the perfect trade.

Patience is the key....because the good trades will always come.

SPI Weekly Report 15th Dec 2007

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Down 5-day pattern, with the Weekly timeframe closing on their lows. This price action was not unexpected, as it was mentioned last week. Around the 3-week cycle highs (6647), it is often the case that price will have a reversal weekly timeframe before the trend resumes from a lower Weekly open.

The big difference now for any up-trend to resume is going to be the December 50% level, because technically everything now is pointing to lower prices.

The market is not trading above any support (50% trend indentification), and could easily make lower lows in December. (below November lows)

Basically the 1 week reversal pattern has moved down to far for any major UP trend to continue in 2007, even though this week is contract expiry which often pushes prices higher by Thursday.

By Analyzing the larger timeframes, the market looks like it’s consolidating for the rest of the 2007, closing out December to set up the major Primary levels for 2008.



The weekly channels are important, not only for trend identification using the 50% levels, but also gives traders a market ‘path’ for price to travel towards and swing back from.

Last week it was modeled for price to move towards 6735 and then reverse back down into the 3-day lows. This week the trend guide is going to be 6523 (weekly 50%) with a rotation down towards 6351 and support.

With a lower Weekly open, there is always an expectation that price will swing back towards the central levels and 3-day highs, before resuming the trend. And I think this will be the case with December contract expiry on Thursday.

In conclusion:- looking for a counter-trend up move next week, it’s a lower Weekly open.

My expectation is that markets are consolidating into the end of 2007, and if that is the case, it wouldn’t surprise me to see rotating UP week (closing higher than open), before having another down week after expiry.

Please refer to the daily updates...

SPI Weekly Report 8th Dec 2007

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Dilernia Principles:- Monthly support (Nov 50%) and moves higher using the December 50% level as Support:- 2-month wave pattern upwards.

The weekly trend has found and verified major support using the monthly 50% level, but the Weekly cycle is still a ‘SELL’, it will only change once Friday closes above the 3-week highs @ 6647.

(previous Weekly Report)



This week has seen the market reverse down 2-days at the start of the weekly timeframe, verify support (Wednesday BUY day) and then continue higher closing above the 3-week cycle highs @ 6647, with the expectation that markets are moving towards the December highs.

A breakout above 6647 this week and the expectation that it will remain above this level for the rest of the week and month as it moves higher.

Below 6647 (3-week cycle high:- resistance) and expectation market is coming back into Daily 'gap' closure before heading higher.

The longer is remains below 6647 next week, the probability that the trading week has the potential to close on it's lows, before rising upwards at the start of the following week:- week of contract expiry and trading longs from near the 5-day lows.

The Weekly Trend was rising this week, but 3 out of those 5 days, day-traders were shorting the market (higher opens) using 'Spiral-Points' and high probability RISK levels:- Monday, Thursday and Friday.



Above is the Daily SPI chart:- rotating down from October highs into November 50% levels and moving higher from the next monthly 50% level, December.

The expectation is that the market is moving higher in December.

What you notice in the chart is how the trend is clearly defined by the 3-day cycles.

What you also notice is the trend of the Weekly timeframe range being defined by the weekly channels. (green)

Around the extremes of the channels and expectation market will rotate back towards the 3-day cycle, and around the middle of the range price follows the market path once again.

Next week the market path is mapped out to move towards 6735.

Ideally, the best and most profitable trading set-up would once again follow the market down into support and then rise higher as it chases the next level.

The best set-up for this to happen is a 2-day reversal into the trailing 3-day lows and then follow the exact same set-up next week, as last week.

A rise upwards on Monday would be towards 6735, over a couple of days before the most probable reversal back into the 3-day lows.

In Conclusion:- Market is rising higher, expectation market is moving towards the Weekly channels highs, with the best possible trade from lower prices:- ideally around higher timeframe support or 5-day lows.

6647:- Weekly trend guide for next week


For Daily analysis please read the daily report 'the trader trading'

SPI Weekly Report 1st December 2007

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There are two major support levels:- 2007 Yearly high breakout, confirmed with the November 50% level. The current price action at this stage confirms major support around November 50% levels, and often this provides the next 2-month Upward wave pattern.

The trend remains intact, and the expectation is that the SPI will move upwards next week, and the December 50% level is going to be the overall guide for the rest of 2007

Short-term:- Expectation is upward next week:- lower weekly closed followed by price rising from a lower weekly open using higher timeframe support. (Weekly report 24th November)





Dilernia Principles:-

Monthly support (Nov 50%) and moves higher using the December 50% level as Support:- confirmed with the start of the next month.

Monthly contract expiry:- the closer it gets to contract expiry the probability is that it the market will rise upwards because the future contract runs at a premium to the Spot contract.

The weekly trend has found and verified major support using the monthly 50% level, but the Weekly cycle is still a ‘SELL’, it will only change once Friday closes above the 3-week highs @ 6647. This will confirm the major cycles in the market, just as the 3-day cycles confirmed the change of trend this week in global index markets with the break and closure above them.

At this stage longer term forecasting favours the Australian Market rising in December because that is how things are currently playing out when looking at the bigger picture. It’s the only conclusion I can make at this stage. It is also supported above the 2007 highs defined by the Model.




In last weeks report I also mentioned that the December level (6594) would be a critical level for December, because it’s this level that is going to provide the potential for any 2nd monthly ‘sell-off’ pattern at the start of December.

“Just like the sell-off at the start of November, any UP swing into December 50% level and trader’s have to look for any sign of weakness for the next wave down.

This is a classic bear pattern that can provide traders with an ideal swing ‘short’, but that is going to be confirmed with a higher open” (SPI Weekly report 24th)


Dilernia Principles:-

1. Short-term:- higher weekly open has a much greater potential to reverse back down at the start of the new week.

2. Change of 3-day cycles:- probability of a reversal back down into the ‘gap’ re-test (3-day breakout) or continue much further down re-testing the 3-day lows. Look at the gap to the 3-day lows. The market won't normally move higher until the 3-day lows catch up with current price action, hence the 2-day stall-reversal.

Even though I’m bullish long-term using the Dilernia Model, the short-term probability patterns can suggest otherwise, and it’s all going to depend how far the 2-day reversal is going to move. Because any down move next week has to be verifed with the break of both the Monthly and Weekly 50% level next week.

3-day high and Weekly 50% level match @ 6512-16:- trend identification for next week (support)

Below this level and expectation the market is going to make a lower low into December lows if US market follow the same ‘sell’ pattern


Fundamentally: - The Australian market looks like it wants to go up, what’s going to drag it lower will be US markets, because technically they are much weaker based on Market dynamics using the Dilernia Model and Methodology