Breakthrough

Below is an article I wrote two weeks ago and for a number of reasons I held it back from release. It is still valid. The market is directionless and probably will be for a while. 

Firstly, welcome back. I hope you had an excellent break and that you are refreshed for the challenges ahead. Normality seems feels like a distant memory but hang in there as we could be closer than we all think to a new order. In any case normality will eventually sort of return but always keep a minds eye out for the “X” factor.

So, is there a breakthrough ahead? How likely?

Well let’s look at a chart firstly – the XAO daily:

The 7120 level you will note is presenting quite a deal of resistance. The market has been within cooee of that level no less than seven times in the last four weeks.

On the face of it you would say that the market is struggling to push ahead.

You will note there was a lot of activity around these levels a year ago with Covid eventually forcing a capitulation.

We cannot ignore that activity a year ago as it all adds to the markets ‘’memory’’.

Elliott says the market should push through

That is the wave five must complete. It could – but it could also meet the minimum requirements and then fail.

Let’s look at the weekly Elliott:

The story has some confirming elements in that 7200 could also be a level of resistance. But Elliott says no big deal because we are going into a range trading phase any way. The market wants to pause before taking a new strong trend - either direction.

Yes, you guessed it, we have to tread water and see a little more data.
But in any case, buying at this point is probably not real wise after such a strong move high in the last year – albeit a recovery. Because the net result is that the market has moved little overall in the 12 months.

Kick back for a while – no action needed – other than maybe trading the odd stock.

Enjoy the ride

Tom Scollon