A Technical Analysis of the Australia Stock Market
The Australia SPASX 200 rose 9.40 points or 0.17 percent to 5,669.90 Friday, December 29th, 2006, with volume at 53 percent of its 10 day average. Upside volume led at only 48 percent, with advancing issues leading at 47 percent, and upside points at 62 percent. Demand Power fell 3 points to 403, while Supply Pressure fell 3 points to 376, telling us there was little conviction about the trend, and little interest in taking a position.
Our key trend-finder indicators remained on a "buy" signal Friday. The Purchasing Power Indicator rose a point to 104.83, a new rally high, remaining on its "buy" signal from November 22nd, needing to drop under 98.83 for a new "sell." The 30 day Stochastic Fast came in at 76.00, above the Slow at 71.72, remaining on its "buy" from November 30th. The 10 day average Advance/Decline Line Indicator remained on its "buy" signal from December 12th, at positive +28.2. Our key trend-finder indicators are designed to find trends of at least 2 percent. So far, prices have moved higher by 3.7 percent to 4.4 percent after our indicators generated recent "buy" signals.
|SUMMARY DAILY STATISTICS FOR FRIDAY DECEMBER 29th, 2006|
|Australia SP ASX 200|
SP ASX 200
|Dec 21||5,583.50||Down 4 to 407||Up 7 to 390||Down 2 to 102|
|Dec 22||5,603.70||Up 2 to 409||Down 2 to 388||Up 1 to 103|
|Dec 27||5,643.20||Down 1 to 408||Down 6 to 382||Up 1 to 104|
|Dec 28||5,660.50||Down 2 to 406||Down 3 to 379||Flat 0 at 104|
|Dec 29||5,669.90||Down 3 to 403||Down 3 to 376||Up 1 to 105|
|Summary of McHugh’s Proprietary SP ASX 200 Buy/Sell Signals|
|Index||Term||Signal||Date Last Given||Fullest Extent of
Index Move Since Signal
|SP ASX 200||Short||Buy||November 22, 2006||Rose 238.70 Points (4.4%)|
|30 Day Stochastic||SP ASX 200||Short||Buy||November 30, 2006||Rose 202.30 Points (3.7%)|
|10 Day Average Short-term Advance/Decline Crossover Signals|
|Signal||Date of Signal||Fullest Extent of
Index Move Since Signal
|SP ASX 200||+ 28.2||Buy||December 12th, 2006||Rose 210.80 Points (3.8%)|
The 10 day average Advance/Decline Line Indicator has been in a declining trend since October, and has been diverging bearishly with prices. We should see a bit more rally, then a multiweek decline in early 2007. We believe this because of the emergence of an Ascending Bullish Triangle -- which is now complete. Triangles are usually wave fours, so this clears things up. The triangle is Minor degree wave 4, a corrective sideways pattern, which has predictably led to one more push north, wave 5 up. We can estimate a minimum upside target for 5 by adding the widest portion of the wave 4 triangle to the breakout point. This targets 5,700. Once wave 5 up completes, we should see a return of the Bear market.
The bottom chart on page 3 shows the SPASX200 rose past its May 10th, 2006 5,406.70 top, hitting 5,409.90 on October 30th, confirming we were in a Symmetrical Triangle for Intermediate wave 4. Prices currently reside inside the rising Intermediate degree wave 5, which should finish the Primary, Cycle, and Supercycle wave five tops.
Upside momentum is waning, so we may fall short of 6,000. Wave 5 must be smaller than wave 3 to comply with Elliott’s rules, where wave 3 cannot be the smallest wave inside an impulse wave, since wave 1 extended, so 6,000 would be a lid. Wave 5 could stop far short of 6,000 if it wants to. We will rely upon our key trend-finder indicators to know when the downside trend begins. Should the Purchasing Power Indicator, 30 Day Stochastic, and 10 day average Advance/Decline Line indicators all generate a "sell," it would likely mean wave 5 has topped. The Weekly MACD is diverging Bearishly with prices, warning a meaningful decline is over the horizon.
Bottom Line: The Intermediate wave 5 rally completed its wave 4 Ascending Bullish Triangle. Wave 5 up is now underway to a major top.
Conservative Balanced Portfolio Transactions Friday, December 29th, 2006
* For our Market Timing segment of our conservative portfolio, we purchased 100 shares of EWA, an ETF for the Australia SPASX200, at $24.36 per share ($ 2,436.00 investment), and also purchased 50 shares of DIA at $123.86 per share ($ 6,193.00 investment), and also thirdly, purchased 100 shares of QQQQ at $44.45 per share ($4,445.00 investment) on December 14th, 2006.
* We also purchased for our Speculative segment (the details are highlighted in the Traders Corner section of our website) 20 contracts of DIA Call Options (controls 2,000 shares), at a strike price of $127, expiring on February 16th, 2007, at a cost of $1.00 per share, for an investment of $2,000.00, on December 14th, 2006. Symbol is DAWBW.
We posted an updated Balances/Market Value Portfolio as of November 30th, 2006, available in the Guest Articles section.
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An Exchange Traded Fund for Australia is symbol EWA
Our Conservative Balanced Investment Portfolio is now available in our Guest Article Section, if you are so inclined.