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At SharesBulletin - www.sharesbulletin.com.au – we issue intra week updates when markets go AWOL as we saw this week. In fact we issued two this week – and there may be more to come.
I am sure subscribes will not mind if we share these updates at this point. Here is what we had to say on Wednesday:
Critical 4500 to be broken
As I write Wednesday morning May 19th at 10:00 am it very much looks like the critical 4500 support level will be broken:
click to enlarge
You can see from the above chart that the market has found support four times at this level in the last several months but, today, unless there is a major positive surprise the 4500 is likely to be well and truly broken.
Even the non-technical market followers have been watching this level closely and I am inclined to think we could see some fear or at the minimum, caution come into the market and this will result in profits being taken – even at this late stage – and this will push the market lower.
I have marked in yellow above the next likely levels of support but we can also turn to the retracement chart below to seek another perspective.
click to enlarge
And it is interesting that with the 23% level of retracement being broken we look to the next Fibonacci level which is 38%. And interestingly this was one of the shaded areas in the first chart – about 4300.
My inclination is that we will see support there but if that is broken – e.g., we see a reality check about how bad the European mess is – then yes there is the prospect of a significant fall to 3800/3900.
I would be careful about trying to second guess the market at the moment and going long – await a resting place.’
And on Friday morning:
‘Free fall?
I don’t think so – well not just yet. The DOW fell 3.76% Thursday - 376 points – and down 5.2% for the week. But our market has fallen 6.5% - both as at Thursday close.
Our futures fell almost 100 points overnight so we will see a soft market today. What might happen?
Yes a very soft opening but I don’t expect that our market will fall to the same extent as the USA markets. We may see some consolidation. But there will be nervousness going into the weekend.
Let’s review our Wednesday view. The 4500 was clearly broken and so the next point we look to now is 4300 - the Fibonacci 38% level:
click to enlarge
But at some point - even today – we could see a relief rally – a move up as some bargain hunters reckon this could be a good time to get a jump on the market. My view is don’t. Let the market settle.
I expect a rally to say 4400 over the next few days and then a deeper low to 4100 and if this does not hold then we could see a fall to 3850 in the coming 2-3 weeks. Beyond that I cannot say.
Come Monday when you read my next report – this could all have changed as when we have major ranges as we are likely to see on Friday – the Elliott count can change quickly’
By the time you read all of this, of course, you will know the next chapter. Well at least one more day of it.
If you are in ‘shorts’ you will have done well. And as a matter of interest this is the performance of SharesBulletin shorts –
BUT just as at Thursday:
Symbol % Week
| MAH -22.73% |
| AAX -22.09% |
| OST -11.31% |
| ALS -10.71% |
| STO -10.06% |
| DVN -10% |
| AIX -8.06% |
| REX -6.20% |
| BHP -4.89% |
| SHL -4.03% |
| APA -3.58% |
| ALL -2.57% |
| ALL -2.57% |
| AEO -1.22% |
And there is probably more to be made. And if you have not done any shorting a relief rally will bring many of you in – and others – and that will weigh heavily on the markets pushing it down more.
Enjoy the ride
Tom Scollon
Chief Analyst
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