Let’s have a quick review of what I said in my last report. On January 10, 2005 I wrote:
"... That small correction is due right now. ... A final high at 4,106 this week would be perfect, however it may not reach there." The XAO continued to rise to an all time high of 4094.8, not quite making the major resistance of 4106 as suggested.
“... Tuesday, January 11 is a potential turning date for the All Ords.” The market made a high on January 11 and turned down the next day.
“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.” The All Ords was declining Friday, January 14 then rose up for a sharp rally to Tuesday, January 18 to the all time high of 4094.8 then commenced its decline.
“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.” As mentioned before, it did make its high at 4094.8 and has since fallen 64 points. I expect that we will see a counter trend confirmation this week followed by the continued decline into the 20.5-month cycle low over the next few weeks.
Possible turning day this week are Tuesday, January 25 and Friday, January 28. Most likely the market will turn up for Tuesday and be heading back down by Friday. It tested the weekly swing low of 4030.6 last week with a low of 4031.3. My bias is that if it breaks that support level, the rate of decline will speed up somewhat. Minor support levels are at 3995, 3972, 3743 and 3626. The market should find stronger support at 3889, 3688 and major support around 3386, if it gets that far down.
CML appears to have fulfilled the rules to sell after its long rise up. For those trading CFD’s it certainly is worthwhile doing some analysis to see if CML is a possible short sell.
Until next week, many successful trades!
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