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 chartsThere 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.
