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.
