Most of the major indices are looking soft especially those we come into contact in daily life – for example our consumer spending and banking; Both very soft. But not all indices are soft...
Let’s firstly look at the overall market through the All Ords, and then resources – materials – XMJ
Firstly XAO:
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All Ordinaries (XAO) - Daily Line Chart
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Click to Enlarge
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S&P ASX Materials (XMJ) - Daily Line Chart
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Click to Enlarge
Identical patterns and the only two indices that have such a pattern at the moment.
I had doubted that the XAO would go much higher, but I had not looked at the other major underlying market indices.
Looking at both of these charts, I can say from experience that though we see a wave four pullback – minor one – the wave three could push up to the wave five projection.
I have witnessed that numerous times and would be very comfortable to buy stocks that show this pattern – buy for a short to medium run.
It appears there is not a high likelihood of a pullback in the overall market in the immediate future.
But I would not be a buyer in such a market for the long term. Short term? We may be seeing the perfect storm.
I must stress I would be very stock selective.
Enjoy the ride
Tom Scollon
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