The Australian Stock Index Report 6th August 2011

SPI Monthly and Weekly cycles

Weakness in US markets over this 5-day cycle has seen the Australian market move down and close below the Primary BUY support level @ 4137, helped by the August 50% level rejection pattern.

Extremely bearish whilst the market is below 4137, and this could see the trend continue down into 3690 by September.

In my new book there is a section on the current market conditions from pages 120 to 130, that spells out the possible price action over the next 2-3weeks, and this will be heavily influenced by the price action in the S&P 500 (read US Report http://usindexweekly.blogspot.com/)

That means over the next 5-days, the market can rise upwards early next week, reach the Weekly 50% level @ 4207, but then continue down into the Weekly lows.

The Weekly lows @ 3890  (Day session @ 3951), will complete the break and extend pattern from last week's lows @ 4321.

Once that pattern has played out, then we look for the following week (3rd Week) for a possible larger reversal pattern upwards, which could take the market as high as 4405-4442 (#B).

if that plays out, then we look for another leg down in the 4th week of August into the September lows.

In conclusion:- Whilst the market remains below the Primary BUY zone @ 4137, longs are open to risk


Footnote:- This week's report was written before Standard and Poor downgraded the US credit rating from AAA to AA+, how it changes the analysis over the next 5-days is yet to be seen