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The roller coaster ride continued this week with the market alternatively rising and falling back to lose those gains, but ultimately closing higher for the week – the first positive week for 5 weeks.

Where to from here is anyone’s guess. This weeks candle closed on its high (up 1.75%) suggesting further rises next week. However, the US closed flat on Friday and without any guidance from Big Brother our market is likely to be directionless on Monday in the absence of any other catalyst. The line in the sand for the XAO is 7466 and should price fall and close below that, we are probably going to see further falls to the next support level. On the other hand, if the XAO can get above 7720 it will make a higher high and might just be encouraged to go a bit further. 7900 is the previous high and I’d be surprised to see price break above that. A continued sideways shuffle until the first week in November is another likely option and were that to happen, the chances of a short rally around the start of the month is plausible. However, until we get a reasonable correction behind us, the chances of a sustained rally are constrained.

Gold is seeing a resurgence but it remains to see if that can be maintained.

Gold sector 8Oct21

This chart of the gold sector index shows that last week price broke above a downtrend that has been in force for some 6 months. A higher close this week would reinforce the view gold prices are in recovery mode. The sector made a head and shoulder pattern early this year which predicted prices falling to 5947 and the lowest close 2 weeks ago was only 1.5% off that prediction. Should the index get a wriggle on and break above 7660 then that would suggest further rises ahead – but how far would depend on the price action leading up that level. Anyway, it is something for the gold desperates to hope for!

I’ve closed out a couple of small trades that broke stop losses earlier this week and haven’t seen many stocks that I’d be prepared to risk a punt on in this challenging market. That said I have added SLR (a gold stock) to my Stocks to Watch. Last weeks watchlist did quite well with SXY and JLG up over 6%. I’ve removed SXY this week as it is unlikely to rise much further in this rally. I’ve also dropped FPH after it fell 5.7% with week. It has retested a previous strong level of price support so it may recover but if I wasn’t already in FPH I wouldn’t be buying at the moment.

Good luck for another week.

Contact

Robert Norman

Phone: 0428 346 951
Email: robert@sharecharting.com.au

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