Has the market bottomed?

I have a question for the chartists out there.
With the AllOrds today bouncing back above 3500, what is the next technical resistance level that needs to be broken to sustain the rally?

 

For S&P/ASX 200 at the moment: 3795, 4340, 4609....IF we get there.

 

That's a BIG if.

 

I would say that the next major resistance to overcome is 4603 or so, then 5037, then 5470

These are the 38.2%, 50% and 61.8% retracement levels for the move from 6873 to 3201

Personally I expect we will spend a long time in the range between 3201 and 4603 before there is any significant upward trend

 

There are few weak levels between now and ... 5177/81.
The most important level is 5177/81 (IMHO).
I would NOT apply Fibo alone to calculate possible future outcome.
In my system Fibo is one of many components.

 

Tropo - fully agree, I don't think man can live on Fibo alone

but it was interesting that the 161.8% extension (that was 3239)
appeared to hold really well

 

It depends on how you are ‘drawing’ an extension.
Sometimes if you choose a wrong points you may get ‘distorted’ picture.
That’s why some players who are using Fibo alone are getting ‘weird’ levels.

 

I was just rereading this thread found it interesting to see that it started out when the XAO was sitting around 4000 mark and we were speculating that a bottom might not be too far off. Well there has been a bit of stability of late, the VIX had been trending down, but it now looks like this bear market rally is over and volatility may be re-emerging into the market?

So did the market find the bottom back in November or are going to new lows?

I'm backing that we will be at new lows before January is over.

 

Hi Chris,

I think the VIX is in the 40s, in the hysteria it got up to the 70s!!!

Cheers,

Dan

 

Chris

Why do you say that?
As you've pointed out the VIX is treading down so I am expecting more stability in the markets and slow but progressive recovery.
^VIX: Basic Chart for CBOE VOLATILITY INDEX - Yahoo!7 Finance - Share Prices, Charts, News and more

Don't forget that there is billions sitting in cash atm
and those fund managers don't get paid to make 5% on our money so they have to invest it or they will be sent home.

Also, the media are now sick of listening to themselves reporting bad news and D&G is no longer newsworthy and will eventually die off.

Therefore, as people see that there is some stability in the markets and that shares on average are going up in value they will get over their fears and more money will flow into the stockmarkets.

cheers

 

It definitely HAD been trending down, but it spiked 5 points yesterday, and my spidey senses are telling me most of the new and figures that will come out over January will not be "stabilizing" sort of figures, so it makes me concerned that the VIX may remain above 40 which is well above a range I'm comfortable with.

Their may be many fund managers who for the most part are more concerned about not losing their job at this point (ie not losing people's money) more so than making their bonuses.

Bad figures are always news worthy, it's just that in Australia to date the figures haven't been that bad and we have just been reporting the rest of the world's troubles which we might be sick of hearing about, but now that our own downturn is now actually starting to build up some steam I bet it starts stealing a bigger allotment of time on the news.

People invest based on the notion that they will get a good yield on their money or their assets will appreciate in value - at the moment you'd be a brave man to be betting with any certainty that a $1 invested today would be worth a $1 or more in a years time as well as producing a good yield in the interim, given that most businesses are downsizing and reporting earning downgrades.

 

I am certain that $1 invested today will be worth $1.25 and more in 12 months time but diversification is key to achieving such returns.

cheers

 

Hi Bill,

Have you invented a time machine that allows you to travel into the future?

Mark

 

Mark

no but looking at the overall market conditions and considering the duration of previous downturns, I come to the conclusion that the market will turn around before december 2009.

With that in mind, we should have a rally sooner rather than later and perhaps followed by some falls later on but selected companies will definitely be heaps higher than they are today and overall the indices will be considerably higher.

Ofcourse this is my guess and feel free to tell me what your own guess is

 

That's a BIG call!

Forget history, this recession is already breaking records left right and center. So recent history is not a good precedent to be basing this downturn on.

I'm thinking Feb through to May will be really tough given that most US companies will start releasing their earnings result and future projections which will be bleak. So at this stage I'd be VERY surprised if we see a sustained rally from current levels of more than 5% before mid year. If anything I think the market really could start retesting last years lows once the figures come out.

Most are predicting that the US will start recovering in the 3Q, I tend to believe that if their recovery started in the 4Q that would be great news, but to be honest I'm expecting their recession to continue until at least 1Q or 2Q in 2010, by which time their currency should have significantly deflated hopefully giving them an improved ability to increase their exports and reduce their current account deficit.

So with all said, I'm expecting the markets to drop further, before flattening mid year and 'maybe' start moving SLOWLY upwards late mid year onwards. Though I think the long run outlook isn't exactly bright either. I'm expecting a couple of years of slowish growth (less than 10%).

And I'd say at this stage this view is still looking on the positive side of things more so than the negative. This global recession could easily throw a lot of spanners into the cogs of recovery.

 

For some reasons we tend to think that once we hit the bottom the only way is up. It may be initially as people will jump and buy stock but then profit downgrades corporate collapses and industry consolidations will continue to keep the market at flat or climbing very slowly for some time before we hit another bull run.

 

Virtually everyone I talk to about investing quote the Buffet line "be fearful when others are greedy and be greedy when others are fearful." This makes me believe that everyone now is greedy, which means we must be fearful, which means we should sell.

If Buffet were to announce this line to everyone in the New York Times then he must want other people to believe it. I suspect he may be trying to make other people greedy so he can sell.

 

What recession?

I can't forget history, and not only that but today domestic and international markets are interrelated. So the affect of a downturn is immediate and therefore should be of shorter duration than downturns we've had in previous years.

What worries me though is that every man and his dog talks doom and gloom and this could result in reduced spending and a self fullfilling prophecy so the downturn could be longer lasting.

 

What on earth have you been smoking?

Mark

 

The global one.

I don't really follow the Australian situation with great interest because in times of economic turmoil the Australian market is taking its lead from the rest of the world. That said, I'm expecting that the history books are already planning to write in that Australia has already fallen into recession for the first time in 18 years. Now it's just a matter of working out what the characteristics of the recession are - ie, short/long/shallow/deep.

My point is not that history is irrelevant, but that this downturn will not be like any recession the world has seen in the last half a century. Therefore expecting this recession to play out like others previously have, in my opinion, is not wise.

The doomers and gloomers are those that are looking at the brutally honest facts and are saying "hey, we were and still have massive bubbles in our markets that are unjustified and these need to be rectified before normal growth can begin again."

The media are ignorant, period. What they say is in the most part barely worth the paper it is written on. They are journalists not economics/businessmen/brokers and their job is to sell papers and advertising. If you want any proof of just how inadequate their opinions are on economic outlooks just reread any news article piece prior to November 08.

The reality is optimists (who are often the ignorant) are slowing the correction process, but I guess you can't really have bubbles if everyone is always acting rationally and is informed.

I think is more a loose rule of thumb rather than something that is a hard and fast rule. I would dare to say that when it comes to a rule like this Buffet would NEVER endorse its use in decision making over assess a situations fundamentals.

I'd saying there is a lot of fear in the market, but there also still seems to be a lot of unfunded optimism around as well.