Technicals | Aug 30 2012
Bottom Line 29/08/12
EW Trend: Corrective
Price Trend: Up
Trend Strength: Strong?
Technical Discussion
LAYMANS:
I keep asking myself the question whether price has any right to be on the verge of breaking into 4 year, in fact nearly 5 year highs !! Yet there is a simple saying to all of this. And that is – do not argue with price! We can throw in as much doom and gloom media reporting, and the fact that volumes have been historically low for such a long period of time now due to the GFC completely scaring away investors who have been scared from the event. We can try and put logic to this move in the form that none of it is real and that the Bears are ready to jump on this at any moment now. Yet the fact is that the price's recent tagging of 13331 was only a mere 10 points away from levels not seen since December 2007. So in saying price doesn't deserve to be posturing where it is is simply a dangerous assumption to make. We've all been smacked on the backside plenty of times in our trading careers by the Bears. Yet to be done so by the Bulls, due to our beliefs on what we think should be happening rather than analysing the mechanics of the markets lead by price action, could lead to a lost opportunity on a potentially grand scale. I'm still looking for a dip to take shape here to clean things up a bit. Yet I continue to see the 12000 – 12500 well supported if and when any such dip was to take shape. And on the flipside we certainly will not be arguing with any upcoming price move that surges into 4-5 year historical highs more immediately. So continuing bullish longer term regardless. On the proviso 12000 continues to be backed.
TECHNICAL:
It has been a difficult chart to count from an Elliott Wave perspective with a number of options remaining on the table from a labelling stance. Outside this though, the more traditional patterns continue to look very solid to me. I'm especially liking the obvious fact that price is posturing around the 4-5 year high zone. And I'm also liking the fact that price action for most of 2012 has coiled on and around a resistance area aligned to 12700 – 12900. This continues to imply underlying strength. What I don't like is the most recent run higher off the June 2012 lows being such a choppy affair. Underlying strength is there yes, yet shorter term the lack of conviction attached to this run suggests that price may not be quite ready to attack those significant highs just yet. It may do so of course and surprise us all, yet for mine I'd prefer to see a dip to clean things out a bit, and then assess whether price can start gathering some steam from there. It just looks to me like the tree needs to be shaken a little to knock away this hesitancy. We may be provided with an (a)-(b)-(c) ascending triangle via a dip back down towards 12500, or a flatter type pattern aligned to wave equality back down towards 12000. Either way, if 12000 continues to hold, then whatever shape or form the pattern takes, I'm continuing to remain positive that before the year is out, price will be quite a bit higher than present levels. So in essence, a short term dip over the coming weeks would be a healthy scenario. And add substance rather than ongoing caution to any future upside moves that may be forthcoming medium to longer term.
Trading Strategy
We were trading this higher yet were stopped out by the barest of margins. Choppy price action will do that to you and is the reason why this has been a difficult one to latch onto. I have to continue to reiterate that with all the evidence at hand, we continue to remain longer term bullish. Yet whilst this choppy price action persists, it just remains a difficult proposition to trade. So for now I'm happy just to continue to stand aside. Nick Radge mentioned on Facebook that the [Dow Jones] Transports [Average] has failed to confirm the Industrials ['the Dow"] move higher. And combined with the Industrials overlapping push north, we just don't appear to have the right conditions just yet to make a move on this. I do believe we are not too far off though. If and when we are provided with this short term weakness, keep a very close eye on 12000 – 12500. They are both price zones where buyer support has been present in the past. So I see no reason why this wont still be the case if our proposed minor dip scenario does look to unfold. Keep it on your watch list.
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