Australian All Ordinaries Index (XAO) for week beginning January 10, 2005

I trust you had a safe and relaxing festive season … and you didn’t eat or drink too much!!

2005 will be a very different year from 2004, for both traders and investors.

WD Gann said that a year ending in 5 in the decade was typically very bullish. I believe that 2005 will be no different (check out the 103 year chart at http://www.asx.com.au/about/pdf/AllOrds.pdf). My bias is that the Australian market is now well into Wave 5 on the Elliott Wave (long term yearly), considering Wave 1 commenced in 1975 and the shorter term (monthly) started in 1987, this is a probably Wave 5 of a Wave 5.

The All Ordinaries index is in the orb period of the 18-year cycle low (Nov 2002-Oct 2008). History shows us that the 18-year cycle high has always been preceded by a euphoric rise that lasted at least 18 months and at least double in price from the low (18-year cycle troughs: 1915, 1953, 1975 - 1932 & 1987 were the lows of the longer term 54-year cycles). The decline into the 18-year cycle low has been at least 38% over a minimum of 18 months (a multi-year decline)! And that is all ahead of us now!!!

This means that the final high of this current rise will be at least 5,332 points (200% of the March 13, 2003 low) and will happen before May 2006 (at least 18 months before Oct 2008 - the latest that the18-year cycle could end). Then followed by the 18-year cycle low – a fall of at least 1,593 points … a bit of a decline. A 1,600 plus decline over at least 18 months would give ample opportunity to make a lot of money of the short side of the market in many stocks and indices.

My bias is that most or all of the rise into the 18-year cycle crest will happen in 2005, but not before a small correction. That small correction is due right now. In fact, I have been expecting it for the last couple of months. A final high at 4,106 this week would be perfect, however it may not reach there. This Monday January 10, 2005 is a ‘high energy’ day and will lend itself to a strong rise; Tuesday, January 11 is a potential turning date for the All Ords. However Friday, January 14 has ‘cycle top’ written all over it. If the market is rising into January 14, expect it to turn and commence its decline, if the market is falling into that date expect another sharp rally up before the peak.

In any case, be prepared for confirmation of a peak in the market over the next fortnight, which should then lead the index into a sharp fall of at least 360 points. Whatever you do, trade your knowledge in the market … don’t trade my comments or someone else’s opinion!


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