Sunday, 18 September 2011

Australian All Ordinaries index long term view

Last week I posted about a trend channel on the ASX 200 that projects a target for coming months of around 2500.

In that post I said:

Trend channels were very popular during the bull market as a tool for projecting targets. They also be applied in a bear market.

The following long term chart illustrates those points more effectively than the shorter term chart I included in the earlier post. Instead of the ASX 200, it shows the All Ordinaries index, chosen in this instance due to the availability of a greater amount of historical data for the All Ords. The ASX 200 and All Ords of course track each other very closely.

The chart also illustrates that this year's decline has left behind the old bull market trend channel, providing additional evidence for the bearish case.

ASX 200 weekly chart

Weekly candlestick chart shown below, including after hours trading, which ended the week almost unchanged from Friday's ASX 200 close of 4149. The market remains below the resistance surrounding the 2010 lows.

AUD/USD weekly chart

Weekly candlestick chart shown below. The long tail for the past weeks trading indicates that the move down following the kiss goodbye from the trend line may be running out of steam.

S&P 500 weekly chart

Weekly candlestick chart shown below. The S&P rallied all week, but the trend is bearish. As discussed previously, the S&P chart for recent months reminds me of the chart leading up to March 2008. If the similarity continues, we might see a rally in coming weeks up to the area of the 40 week moving average, before the market turns lower.

EUR/USD weekly chart

Weekly candlestick chart shown below. While the market trades below the 40 week moving average I consider the trend to be down. As discussed previously, breaks below that moving average in 2008 and 2010 lead to strong declines.

Gold closes on trend line

Daily candlestick chart shown below. Will the close on the trend line prove to be a kiss goodbye ahead of a decline, or is the market positioning for a false trend line break?