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.
