Technicals | Sep 27 2010
By Rudi Filapek-Vandyck
One more leg down and then a firm rally into calendar 2011. That's the updated market view of Daniel Goulding, publisher of The Sextant report.
Throughout most of the period since the market sell-off in late 2007 Goulding has been on the side of the bears, and he has stuck to a predominantly bearish view even when in March 2009 others started talking about a new bull market and shares worldwide rallied.
More recently, Goulding has reversed his view, but only for the short and medium term outlook. The longer term horizon for equity markets remains negative (bearish), Goulding maintains. He does not think the rally post October will be able to surpass the index levels reached in April this year.
That is, unless the market does what it is not expected to do: push the ASX200 beyond 4760 by week's end (less than 100 points to go on Monday). If that happens a new trend will have been put in place for the share market, Goulding reported earlier.
While overall messages from share markets remain mixed, Goulding believes the bias is now to the upside and his favoured scenario would be one that sees sideways trading into October, one more sell-off around mid-October and than a strong finish into the new calendar year.
Alas, we feel obliged to add at this point the share market hasn't exactly followed his favoured scenarios in August and in September. Goulding counts waves and thus scenarios can change as the market at times forces him to review his wave counting.
Assuming his current market scenario is correct, then the second or the third week of October should see the ASX200 index returning to between 4380 and 4480, after which the final leg upwards (for the year) should commence.
Goulding does report his scenario for October does not come with much conviction. What he is confident about is that the share market will be higher by year's end compared with index levels in September.
As far as the longer term outlook is concerned, Goulding remains convinced share markets will revisit the lows seen in March 2009. On his present calculations, these lows should be revisited sometime in 2012, early 2013 at the latest.
In summary, Goulding's view is at present: consolidation first, which should see a retreat in mid-October (but not necessarily so), after which shares should rally throughout December and into the new calendar year.
He does not think the highs seen in April will be broken during this rally.
All on the premise that 4760 will not be broken this week.
The views expressed above are the author's, not FNArena's (see our disclaimer).
