Aussie ( SPI)Index Weekly 1st Nov 08

I Read some forums and you can easily find the perma bulls and perma bears.

Perma bears are making hay while the sun shines. They are the one's sitting in cash, waiting and taking pot-shots at bulls who keep buying falling markets.

Whilst the bulls keep trying to call bottoms in the market, and have done so since the first lows in March. Any sign of a bullish candle, oversold oscillators, 3 up days in a row, and they believe the bottom of the market has been confirmed and a new bull trend will begin.

There will always be a bottom in the market each month and each quarter, but it’s how you use those bottoms that matters most, not what you think will happen after a 3-5 day rally.

As I've always said... "those that anticipate best will prosper".... and I'd like to be Buying as close to support as possible, not after a 3-5 day rally.

Simply trade what you see and not what you think will happen. Adjust to market dynamics and be patient, the trades will always appear.

Around these October lows I’ve traded Resource stocks twice, and exited both times with the best gains of 17%:- BUY support.

This support disappears in November. What this means is, my BUY zones in October have shifted lower but doesn’t mean the market will go lower.

I’m in cash positions on both the Financials and Resources stocks. If the market goes down in November I’ll trade accordingly using my model.

If in fact the lows in October have been set and the market continues upward next week, then I’ll adjust to the market.

All I'm concerned is trying to trade and make over 15% per quarter, the more downside, the more frequency of trading each quarter and the more potential return.

15% per quarter can easily end up being 50% per quarter:- 3rd quarter lows on Financials were a perfect example.

At this stage in this down trend I still think it’s way too early to be buying and holding stocks for the long term......


XJO Yearly

11th October Weekly Report:- "A Monthly and Quarterly close below the Yearly lows constitutes a breakout, which will lead to further erosion in stocks prices in the 4th Quarter...and a bear market and then another leg down into 2009

October lows resistance (breakout forms resistance), and the trend guide for the 4th Quarter will be defined by the November 50% level.

If that's the case:- then around November lows could provide the ideal 'swing' low for a swing back towards the 2008 lows breakout"

Since that Report the Market has reversed back up into the October low breakout and reversed back down.

This often occurs to verify the breakout, which more often than not leads to further weakness into the extended lows in the following month:- 3580

At this stage:- whilst price is below the November 50% level the expectation is that price is going to continue down into November lows.


SPI Futures:- Monthly and Weekly


Is the Aussie market going to continue up towards 4315 in early November, or reverse down from next week and continue down into November lows?


I can't answer that until things begin to unfold... but a higher Weekly open and trading below the Monthly balance point @ 4155, can easily sell down at the start of next week.


If the Aussie market was going to continue higher in November, it should have already be trading above the Weekly 50% level....In fact it struggled to even get that high last week:- 4140


Financial Index:-

And when I analyse resource stocks and the Financial Index the same breakout patterns have occurred even though these stocks look supported in October.

This is the first time since the January breakout that the Financial Index has closed below it's Monthly lows, which more often that not goes lower in the new month.

The Financial Index should have bounced off the 4th Quarter lows in the first 2 weeks of October and should have closed above the October lows, and not below.

Resource stocks have been supported above 4th Quarter lows, which I've bought and sold on 2 occasions in October:- Exit Weekly 50% levels.

But both BHP and RIO have failed to close above their October lows:- Dilernia model.

This favours more downside in November.

Note: there is no guarantee that the market will go down into 3580 in November, but after buying stocks on two occasions in October and selling them, I'm happy to sit in cash positions and wait until things begin to unfold.

Note: As my 11th October report suggested, if price can move down into November lows, this will be the pattern that I think should finally get more Buyers appear pushing the market higher into the close of the 4th Quarter....

But will eventually lead to lower prices in 2009.

Aussie ( SPI)Index Weekly 25th Oct 08

Australian Index Yearly charts

As I've been saying for the past 10 months:- lower prices into 2009......

The only problem for most investors is:- the lower markets go in 2008 the lower 2009 will go, as it keeps pushing the market lower in the forward Yearly timeframe.

SPI Monthly and Weekly charts

"SPI trading below October lows and expectation price will remain below these lows for the rest of this month.

Lower Weekly open therefore there is an expectation that price will rotate back towards the Weekly 50% level.

That could occur in the first 2-3 days, and then the possibility of continuing down towards the Weekly lows" ............20th October Premium Report


This Week the SPI traded outside the Monthly break and followed the timeframe with a 'test and Reject pattern' down into the Weekly lows.

Next Week:- much the same as this week, with the closing price next Friday defining the trend path for November and potential down move into November lows.

SPI 5-day pattern

Monday started with a move above 4063 and began the 2-day move back towards the Weekly 50% level @ 4340.

Once Wednesday broke the 5-day 50% level, the rest of the week followed the 5-day pattern lower.

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Aussie ( SPI)Index Weekly 18th Oct 08

XJO Cash Monthly chart

"My view on Resource stocks were that they were moving down into lower lows in November. With Resource stocks moving lower in the 4th Quarter and Financials already trading around near their highs in the 3rd Quarter, there wasn't much hope for the Aussie Index.

I've been bearish on Resource stocks in the 4th Quarter with the expectation of lower lows into November" Previous Weekly Report

This Week Resource stocks have been hammered. There could be some support coming into resource stocks around this week's lows, which could support the market for a couple of weeks.

But as I've been saying for a number of weeks now since August:- I expect further weakness of resource stocks into November:- Dilernia Principle


"Long term:- October lows resistance (breakout forms resistance), and the trend guide for the 4th Quarter will be defined by the November 50% level.

If price remains below the October lows and closes below the October lows on the last day of this month, then there is an expectation that price will continue down into November lows.

If that's the case:- then around November lows could provide the ideal 'swing' low for a swing back towards the 2008 lows breakout.

If there is any support around the November lows, then this can result in Price making it's way back towards the breakout of the 2008 lows late in this 4th Quarter or early in the first Quarter in 2009, and then continue lower from 2009 into the new Yearly lows. "

Previous Weekly Report

This Week has seen the Aussie Index like all global indexes test the October low breakout and fail.

I'm currently looking for a couple more weeks of sideways volatility, and then define the Trend by November's levels, as shown above.

Any down trend into November's lows, and my view is will be price will finally find 'a bottom' in 2008, but not 'the bottom' in this bear market.

I'm still expecting lower lows in 2009.

Aussie ( SPI)Index Weekly 11th Oct 08

"Worse case scenario:- October 50% level rejects prices and fails to close above the 50% level for the rest of the month and then continues lower for the rest of 2008.

This results in the Yearly timeframe closing below 4232, pushed down by resource stocks. I've been bearish on Resource stocks for the 4th Quarter, and I do have a view that resource stocks will be making lower lows into November.

A Yearly close below 4232 constitutes a breakout in the Yearly timeframe, which eventually leads to another 2 year ‘bear market’ into lower lows in 2010.

It also pushes the lows in 2009, which leads to further erosion in all stock prices, before any counter-trend move upwards"

Previous Weekly Report

Australian Index (XJO)

The Australian Market like all global markets followed the 'crash' pattern in the 4th Quarter, and like all other markets are now trading below their Yearly lows. (support)

I expected weakness in the 4th Quarter, and I expected another down leg in 2009, but I didn't expect the carnage that occurred this week.

Energy and Financial Indexes

Resource stocks and Financial stocks make up the largest component of the Australian Index. Therefore if I'm interested in trading those stocks, it would make much more sense to look at those individual indexes than making decisions based on the XJO.

Trading and analysing the Index is fine when trading Index Futures, but if trading certain stocks then it's better to have a look at their own index and see where support and resistance is to make certain decisions when trading BHP, RIO or any of the banks.

Even before this price action occurred this week, my view on Resource stocks were that they were moving down into lower lows in November. With Resource stocks moving lower in the 4th Quarter and Financials already trading around near their highs in the 3rd Quarter, there wasn't much hope for the Aussie Index.

I've been bearish on Resource stocks in the 4th Quarter with the expectation of lower lows into November. I've also expected the Financials stocks to come down into their own 4th Quarter support zones @ 3973 on the Financial Index.

The 'crash' pattern last week wasn't all because of Financials, Resource stocks dragged down by falling commodity prices were also part of the drop.

Both the Resource stocks and Financial stocks are now trading around 4th Quarter support zones. It's these support zones next week that will give all traders are better idea how the overall market is fairing.

If support is valid next week in both, and the overall market moves up from the lows, I have a feeling that Financials are going to fair better than resource stocks, because I still view resource stocks moving down towards the Yearly lows (8398)

SPI Weekly and Daily charts

There are still over 2 months to go before this year ends, but where price closes in 2008 will determine how far markets go down into 2009.

As previously pointed out:- the lower it closes in 2008 the further it goes down into 2009.

The only redeeming factor in this current price action is:- price will go back and re-test the 2008 breakout some time before the market continues down the following year.

I normally have a fair idea on price action and the direction of the market using dynamic support and resistance zones within each higher timeframe:- Monthly, Quarterly & Yearly.

Last Friday (October 3) the Aussie market closed above the support levels, however US markets closed below their Yearly and Quarterly lows on the last day, resulting in a 'crash' pattern last week dragging all global markets down much further than expected.

http://www.usindexweekly.blogspot.com/

So what do I Think will happen?


Long term:- October lows resistance (breakout forms resistance), and the trend guide for the 4th Quarter will be defined by the November 50% level.

If price remains below the October lows and closes below the October lows on the last day of this month, then there is an expectation that price will continue down into November lows.

If that's the case:- then around November lows could provide the ideal 'swing' low for a swing back towards the 2008 lows breakout.

If there is any support around the November lows, then this can result in Price making it's way back towards the breakout of the 2008 lows late in this 4th Quarter or early in the first Quarter in 2009, and then continue lower from 2009 into the new Yearly lows.


In the Short-term:- Hedge funds will continue to play around with the same 5-day pattern each day, and the Weekly ranges (green) shown in the Daily chart should be the trend guide for next Week.

I'm not going to pick the bottom in this market, the first sign will be a move above the 5-day 50% level, but will need to be confirmed with price trading above the Weekly 50% level.

But the overall Index will de defined by how well both the Energy stocks and Financial stocks re-act to their Quarterly lows next week.

Aussie ( SPI)Index Weekly 4th Oct 08

Australian Cash market (XJO)

Yearly lows reached @ 4538 in September, but any up trend in the 4th Quarter is defined by the October 50% level.

Best case scenario for the rest of 2008 is:-

October 50% level is the trend guide for the rest of this month.

A SET-UP:- October 50% level rejects price down into October lows forming a double bottom and then reversing upwards, crossing over the Monthly 50% level sometime during the month, and then continuing higher into the close of the year

This would lead to a zig-zag formation for the next 3-months, but will eventually lead to lower lows in 2009.

Worse case scenario:- October 50% level rejects prices and fails to close above the 50% level for the rest of the month and then continues lower for the rest of 2008.

This results in the Yearly timeframe closing below 4232, pushed down by resource stocks.

I've been bearish on Resource stocks for the 4th Quarter, and I do have a view that resource stocks will be making lower lows into November.

A Yearly close below 4232 constitutes a breakout in the Yearly timeframe, which eventually leads to another 2 year ‘bear market’ into lower lows in 2010.

It also pushes the lows in 2009 lower than if Set UP A occurs, which leads to further erosion in all stock prices, before any counter-trend move upwards.

Even though both scenarios will lead to lower lows in 2009, I hope that we don’t follow the worse case scenario and close below 4232.

But I’ll come to that at the end of 2008.

Until then it’s all about the October 50% levels in all global markets and how far Resource stocks drop into November.