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Looking back over the history of the Australian market since the inception of the SPI futures contract in 1983, you will find no other bear cycle as savage for such an extended period. We have had longer running bear cycles, but nothing, apart from the very short 1987 crash, has wiped off such a large percentage from the last major high. We are now back beyond the 50% retracement level of the all-time major range and just poking our nose below the 50% pressure point being half the top, 3440 (6880/2). (As I write this though (Friday 21 November) the SPI has just rallied strongly from the low of the day at 3234 to be currently trading at 3431.)
Our red Time by Degrees date for November on the SPI is looking very strong. A know after getting out to a couple of recent seminars, our time traders are buzzing about the potential around now has for a turn, being 180 degrees from the May 2008 top.
Table 1 is the list of the top 20 stocks on the ASX. These stocks by far have the biggest influence on the SPI and its movements. These are the heavy weights. What hasn’t escaped our attention is just how many of them have just recently slipped past 50% of the last major high. .
Table 1 – ASX20 Stocks – Percentage Drops since Last Major High
|
Stock
|
Last Major
|
Month
|
50% of
|
Yearly Low
|
% Down to
|
Last Trade
|
% Down to
|
|
|
High
|
|
High
|
(YL)
|
YL
|
(LT)
|
LT
|
|
AMP
|
10.97
|
Oct-07
|
5.49
|
4.91
|
55%
|
5.14
|
53%
|
|
ANZ
|
31.74
|
Oct-07
|
15.87
|
12.30
|
61%
|
12.98
|
59%
|
|
BHP
|
50.00
|
May-08
|
25.00
|
20.00
|
60%
|
20.77
|
58%
|
|
BXB
|
14.93
|
Oct-07
|
7.47
|
6.82
|
54%
|
7.29
|
51%
|
|
CBA
|
62.16
|
Nov-07
|
31.08
|
27.85
|
55%
|
29.50
|
53%
|
|
CSL
|
43.19
|
May-08
|
21.60
|
28.50
|
34%
|
29.60
|
31%
|
|
FGL
|
7.25
|
Feb-07
|
3.63
|
4.26
|
41%
|
5.34
|
26%
|
|
MQG
|
83.59
|
Nov-07
|
41.80
|
20.08
|
76%
|
26.94
|
68%
|
|
NAB
|
44.84
|
Nov-07
|
22.42
|
17.81
|
60%
|
18.21
|
59%
|
|
QBE
|
35.49
|
Sep-07
|
17.75
|
19.50
|
45%
|
23.20
|
35%
|
|
RIO
|
157.45
|
May-08
|
78.73
|
54.00
|
66%
|
55.59
|
65%
|
|
SGB
|
38.50
|
Oct-07
|
19.25
|
21.40
|
44%
|
22.10
|
43%
|
|
SGP
|
9.38
|
Dec-07
|
4.69
|
3.28
|
65%
|
3.46
|
63%
|
|
SUN
|
22.78
|
Oct-06
|
11.39
|
6.32
|
72%
|
6.90
|
70%
|
|
TLS
|
4.97
|
Apr-07
|
2.49
|
3.90
|
22%
|
3.99
|
20%
|
|
WES
|
45.90
|
Jun-07
|
22.95
|
16.75
|
64%
|
18.03
|
61%
|
|
WDC
|
23.41
|
Feb-07
|
11.71
|
12.89
|
45%
|
13.27
|
43%
|
|
WBC
|
31.32
|
Nov-07
|
15.66
|
14.59
|
53%
|
15.69
|
50%
|
|
WPL
|
70.51
|
May-08
|
35.26
|
26.81
|
62%
|
28.62
|
59%
|
|
WOW
|
35.05
|
Dec-07
|
17.53
|
22.85
|
35%
|
24.18
|
31%
|
Gann talked a great deal about the concept that a percentage of a previous high can help call future lows with the strongest percentages of all being the 50% value. That being said we also know that 62.5% and 75% are well worth watching as well should 50% of the high be broken.
Looking at the 8 financial stocks in the top 20 (AMP, ANZ, CBA, MQG, NAB, SGB, SUN, WBC) we get some interesting statistics looking at the yearly lows relative to the last major highs. These financial stocks have been a huge part of the downward movement on the SPI.
- 4 out of 8 have come back 50%
- 2 out of 8 have come back to 62.5%
- 2 out of 8 have come back to 75%
Trying to pick the low of the SPI has been a tough business for those attempting it over the past few months. Some may have found they have inadvertently been ‘averaging down’ with their stock purchases over that same time. Looking at the statistic there are some potential bargains out there. Many of these stocks have come back to exciting key percentages of the last major highs. Combine this situation with some technical skills on how to identify a ‘change in trend’ swing trade and there looks like potential opportunities galore over the next few months.
Until next time...
Noel Campbell
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