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The XAO rose 0.3% to hit a high of 7656 this week before closing at 7624, coincidentally right on the top boundary of a what I believe to a price channel that has held above price all-time highs since 2009. The week’s high was also 20 points shy of the possible top my charting analysis suggests. In short – the party is probably over and a correction is now gathering on the horizon. I was search for an analogy to describe the current market outlook to post on a stock forum I frequent and ended up writing the short story at the foot of this post.

XAO 18Jun21

Interestingly, the XJO (which tracks the ASX 200 as against the XAO’s top 500) suggests it probably has another 200 points to run. That could be down to the beefier stocks in the XJO being both slower moving and more resilient.

Channel boundaries are not impenetrable. Like everything in charting, they are simply an indicator, but then a ‘Don’t Walk’ sign is an indicator as well – not one to be ignored.

With the Dow down 3.5% last week and 1.5% Friday night it is a given our own trading will open lower next week (our futures are down 1.5% as I write).

I have moved to a more conservative portfolio profile over the last 2 weeks and will now start using prior troughs on the daily chart as stop losses unless faced with strong charting analysis that says otherwise.

I have mentioned previously that charting of individual stocks gets a bit unreliable when the market is near its top and investor fear starts to replace greed. All bar 2 of my 15 Stocks to Watch fell last week and 7 have been deleted on the basis their price moves suggest they are less likely to achieve their targets. Most stock patterns are bearish of late and the only stocks I’d suggest as having promise (and were added) to my Stocks to Watch this week were COH and TCL. Both companies are coming off lows and well short of their all-time highs, suggesting they could have clear air ahead for a while.

Travel stocks (WEB, FLT etc) showed some life this week but with Covid still bubbling away their outlook remains troubled. More so AstraZeneca had not been approved by the FDA and perhaps when things do open up will those Australians who received AstraZeneca will face restrictions if Broadway’s restrictions on their first post-Covid concert by Bruce Springsteen is any indication.

My own trading for the week was down around 1% due to big falls by gold stocks (supposedly in response to a rising US dollar). The charts suggest gold is at a level of support and may rally (hopefully, as I am a little heavy in gold).




With nothing to do while the charter flight (VH-ASX) was  on auto-pilot, the pilot and co-pilot, both dead tired after several long shifts, had dozed off only to be startled awake by the persistent buzzing of a warning indicator.  The alarm drowned out the music playing softly in the pilot’s earbuds. Ol’ Blue Eyes was crooning out prophetic lyrics – “And now the end is here, and so I face that final curtain.....

Outside it was now totally dark and they realised they had been asleep for some time. A quick check of their location and instruments showed they had overshot their destination by more than 100kms and the plane’s low fuel warning had kicked in. The pilot knew their fuel load was a little light before he took off, but he’d flown this route dozens of time and with bad weather coming he didn’t want to waste time refuelling. Nobody would know he bent the safety rules a little, it was something he’d got used to getting away with.

They needed to turn back - urgently. The pilot banked the plane around 180 degrees and contacted air-traffic control, only to find they had been trying to raise him since the plane deviated from its flight plan.

Now flying into the cold front that had previously been behind them, they were  buffeted by rain and wind. The co-pilot visibly paled as he calculated their fuel use only to realise it would be touch and go whether they would reach the safety of the airfield still some distance away.

To conserve fuel the pilot started to slowly descend in a long glide pattern towards their destination, aware his skill would now determine whether they had a soft landing or crashed. “At least there won’t be much fuel to burn” he thought sardonically.

Time passed slowly, too slowly. The pilot’s shirt was plastered to his back with sweat and his knuckles were white on the controls. A smile of hope crossed his face as the lights of the airport became visible in the gloom ahead.

The port engine coughed and spluttered ............


Robert Norman

Phone: 0428 346 951

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