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Market status update

September 17, 2010
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We’ve seen an important technical pattern emerge within the past two weeks that could mean the start of something positive for traders and investors.

To provide you with further insight, since the 15th October 2009 to the 13th September 2010, the ASX All Ords has moved in two sideways patterns. The first was in a 10% range trading band between 4500 and 5000, the second in a near 10% range between 4200 and 4640. Whilst sideways markets have been experienced in the past, there has not been such a sustained and wide range trading market in Australia since the ALL ORDS has been tracked on the combined ASX boards starting just over 30 years ago.

Typically when the All Ords has range traded in past years, it has done so in much narrower bands of between 3- 5%. These narrower bands have been easier to manage and trade purely because the range is not wide enough to produce new medium term technical entry and corresponding exit signals.

What we’ve seen over the last two trading sessions is the All Ords break through it’s recent 4 ½ month range trading band.

If the economic news remains positive over the next few trading sessions, we could see the All Ords continue to rise but I would expect the market to have a small retracement and come back to its resistance level of around 4640, which now should become a support level if the All Ords continues higher.

I say “if the economic news remains positive” because the world is still coming to grips with the after effects of a bad hang over. It almost feels as if the market is doing everything it possibly can to rise above the poor economic factors that currently plague the world.

Those that are on the sidelines waiting for the markets to turn positive should take closer note over the next week or so because if the market tracks higher it could happen very rapidly.

Technically, the reservation that I have is that range bound markets expand their range. However the range is expanded to a point that, if breached, the probability becomes very high that a new trend will develop. By my calculations there are two such points in this range bound market. The first, slightly riskier point is a close above 4683 which occurred on Wednesday. The second more conservative point is 4743. Take note if the All Ords closes above 4743.

SPA3 customers have already received a low market risk signal and should be increasing their exposure.

From my own trading experience, the last 11 months has been one of the toughest trading periods of my 20 year career. With the market having developed little to no trend over the past 11 months it has provided an environment that has been truly challenging to trade.

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Comments

  • Peter says:

    Gary I agree with what you are saying about the market being in a sideways trend. I aslso agree that it would have been difficult to trade the market during this period. But … I and I suspect nearly everyone else who buys and sells shares does not trade the market. I trade individual stocks. My edge has given me many signals over the last 11 months and several of the gains have been truly outstanding. I also have had many losses but none have been substantial. My edge is suited to trending stocks. And there have been several that have trended nicely for several months and have now stopped trending and some that still are trending up like MMS.

    I do note in closing that my edge has been having difficulty in the last month finding any stocks to buy.

    Keep up the great posts. I read every one and aalwsys find something interesting to think about.

    Peter

  • Vladimir Smirous says:

    Highly volatile but positive till 22nd Sep. Bearish trend start from 23rd Sep and sharp decline from 26 Sep till 16 Oct.

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