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September 24, 2006

The Australia Market Report
by Robert McHugh

The Australia SPASX 200 fell 12.70 points or 0.25 percent to 4,983.20 Friday, September 22nd, 2006, with volume at 102 percent of its 10 day average. Downside volume was 61 percent, declining issues were 61 percent, and downside points were 62 percent. Demand Power fell 3 points to 396, while Supply Pressure rose 3 points to 407, telling us the decline was solid. Our key trend-finder indicators remain on a "sell" signal Friday. The Purchasing Power Indicator was down 1 to 74.04, remaining on its "sell" signal from September 11th. A rise above 78.26 would generate a new "buy." The 30 day Stochastic Fast came in at 50.50, below the Slow at 60.61, remaining on its "sell" also from September 11th. The 10 day average Advance/Decline Line Indicator came in at negative -8.3, on a "neutral" signal as it was on a "buy" from August 18th, but fell below zero, but not below -10.0. It is in a declining trend.

The SPASX200 finished a small Rising Bearish Wedge for wave {c} of 2 up, and a sharp decline followed, Nano degree wave {i} down, the start of a move at least to the beginning point of the wedge, around 4,900. This considers the June to September rally a correction of the Micro degree wave 1 decline from May, which was the top, the completion of a Rising Bearish Wedge termination pattern from March 2005 through May 2006. What bothers us for the Bearish case is the possibility that the decline from May 10th to June 14th may be a three-wave move. If so, then one of two alternate scenarios could occur, both Bullish, one Bullish short-term, the other Bullish Intermediate term. Short-term, nano wave {ii} up looks complete, correcting {i} down, with {iii} down underway.

The short-term Bullish alternate scenario is shown at the top of page 4 under the alternate line. It suggests June's bottom was wave d and we are starting a final wave e up to a major top. The intermediate-term Bullish alternate scenario is shown above. It suggests the move from May 10th is a completing Symmetrical Triangle for intermediate degree wave 4, and that intermediate wave 5 up is coming next. That could last several months, but the rise must be shorter than waves 3 or 1 were to comply with Elliott's rules.

We do not have enough confidence in the alternate scenarios to rank them higher than alternates at this time, but they are out there so we present them for your consideration.

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"Behold, children are a gift of the Lord;
The fruit of the womb is a reward.
Like arrows in the hand of a warrior,
So are the children of one's youth.
How blessed is the man whose quiver is full of them."
Psalm 127:3-5

Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

Copyright © 2004-2008 Main Line Investors, Inc. All Rights Reserved.

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