On the catastrophic collapse of the Dollar

Source from: http://ozstock.blogspot.com

The topic of this discussion is the possibility of the catastrophic collapse of the US dollar, leading to hyperinflation and the devaluing of the dollar. To start off, I would declare that I am not a professional economist nor financial analyst. I am a layman investor who keeps tracks of the financial signs of the times. My recent readings has found more than a few commentaries and articles on the precarious situation of US debt.


References
===========
Before going further, here are the links of the surprising number of books I found on the subject.

[1] The New Economic Disorder: Strategies for Weathering Any Crisis While Keeping Your Finances Intact


[2] Crash Proof 2.0: How to Profit From the Economic Collapse


[3] The Collapse of the Dollar and How to Profit from It: Make a Fortune by Investing in Gold and Other Hard Assets


[4]
End the Fed by Ron Paul

[5]
The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments

[6]
Debunking the Hyperinflation of Peter Schiff and the Gold Bugs: A Guide for Investors

This subject of Financial Armageddon is pretty far fetched if this is the first time you have heard of it. I got seriously interested just last week after reading book [1]. That's when I hit Amazon to check out other books and was surprised by the others. Book [2] is by Peter schiff who claimed to have predicted the housing crisis leading to the Global Financial Crisis. To be balanced, I thought of providing the reference to Book [6] which aims at debunking Peter Schiff. But note that Schiff is hardly the lone voice on the matter. Book [4] is written by Congressman Ron Paul calling for the end of the Federal Reserve. Book [1]'s author was a Bank CEO as well as politician.

http://www.theage.com.au/national/joyces-armageddon-warning-20091210-km90.html
In addition, when a new, maverick, Opposition Finance Spokesman from Australia, warns about US economic collapse leading to worldwide collapse - it really caught my interest. He had to get his information from somewhere on such a matter, since he has no track record as an economic genius.


US Debt
========
The US (public) debt stands at about 12 trillion, see:
http://en.wikipedia.org/wiki/United_States_public_debt
http://www.usdebtclock.org/ - cool website with real time Debt and Interest meters.

The foreign ownership of US Treasury Securities is about $0.8 trillion by China, $0.75 trillion by Japan.

This is just mind boggling. There is serious questions on whether the US can service the debt any longer. Two main options are:
i) Print more money - done by the Federal Reserve. Such actions would lead to inflation and the devaluing of the dollar. Simple thought - more money printed more inflation. The nightmarish scenarios are the Weimar Republic in the 1920s and the recent/current Zimbabwe inflation crisis.
ii) Declare Bankcruptcy - this is what happens when entities cannot pay their debt. In general, the consequence of this is creditors will come in carve out the assets of the bankcrupted entity. To US investors, this means their bonds may be worthless. To the outside world, the ramifications are enormous - feel free to add to this via comments.

In either case, if you are an investor with lots of US bonds, they will be wiped out. Or if you holds lots of cash, they will be worthless.

Risk Analysis
==============
The scenarios listed above are pretty extreme. In the world of Quantitative Risk Analysis, one method of calculating risk involve assessing an event in terms of
i) Frequency (Likelihood of occurring); and
ii) Severity (Impact).

The severity, without putting in dollar terms, is harsh. You'll see other words like meltdown and armageddon being used to describe how bad the situtation can be.

The frequency? Well, the US has never been bankcrupt or in hyperinflation before. From historical facts, the frequency would be 0.00000. But this does not mean it cannot happen. Say even if it has a frequency of 0.000000000001, then when it does happen, most people will still be wiped out financially. Would you be in this position? Can we be prepared for this? From recent readings, I would also suggest that to some economist / thinkers, they would put a frequency (probability) value as a very low number but definitely note close to 0.

Federal Reserve
================
The Federal Reserve of The Fed sets the monetary policy in the US. This means it sets the US interest rates. Some facts about the Fed:
- Created in 1913 by the Federal Reserve Act in response to prior financial panics and bank runs.
- Suppose to function as and independent and Central Bank.
- Among its power is the ability to print money.
Some surprising facts about The Fed:
- Contrary to public assumption The Fed is in fact owned by a number of commercial banks . So whose interests are they really caring for?
- The Federal Reserve Act was drafted in a somewhat secretive manner at Jekyll Island, Georgia with big names like J.D.Rockefeller Jr. and J.P. Morgan.


Deliberate Inflationary policies
==================================
Some writers suggested that policies (eg printing money to pay debt) that ultimately lead to inflation may even have a hidden motive to bring about a change in the currrent system. Recent example of Zimbabwe's currency crisis begs the question: is it mismanagement or an attempt to exert further control.

Quote from "The Economic Consequences of the Peace", by John Maynard Keynes, Ch VI
http://www.gutenberg.org/files/15776/15776-h/15776-h.htm#CHAPTER_VI
-------------
Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become "profiteers,", who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.
-------------

Dethroning of Gold - Gold is Dead, Long Live the Dollar
========================================================
Most people in this world have lived within the period where the US is the international currency. But for thousands of years before, it was Gold which is the widely accepted standard. Through a series of government policies in the 20th century, Gold has been steadily but surely dethroned.

What is Money - Paper money is a represenation of assets. It is a convenient medium of exchange of wealth. It should be backed up by something tangible.

Back in 1935, a one-dollar "Silver Certificate"(1935 series) clearly spelled out the terms of the contract by stating: "THIS CERTIFIES THAT THERE IS ON DEPOSIT IN THE TREASURY OF THE UNITED STATES OF AMERICA ONE DOLLAR IN SILVER PAYABLE TO THE BEARER ON DEMAND"

Today, the US dollar belongs to the Federal Reserve. It is called a Federal Reserve Note (FRN), not the US government nor the people. The FRN paper money makes no promise to let you exchange it with any real asset. It is referred to as an IOU Nothing.

From 1882-1933, US Gold certificates paper money are redeemable in gold - they have intrinsic value.

In 1934, the FRN came into being to replace the Gold certificates.

Also the Gold Reserve Act 1934 outlawed US citizens from owning gold and gold certificates. It forced everyone to sell gold to the US Treasury such that only the US government has the right to hold gold. At the same time, one troy ounce of gold was pegged to US$35 (devalued from US$20.67). So, despite outlawing gold domestically, the US dollar still had a fixed intrinsic value overseas.

Only from 1975 can Americans own and trade in gold.

Bretton Woods agreement 1944. Besides establishing the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), it setup a system of fixed exchange rates with the US dollar as the Reserve Currency, given that the US dollar was fixed to the gold standard.

In 1971, the fixed exchange rate between Gold and the US dollar was abolished by Nixon. This finally removed any kind of intrinsic value of the US dollar.

Since the US dollar is no longer tied to gold, and the more it is printed, the more it loses its value. The extreme scenario of hyperinflation is that the currency becomes worthless. Already there are signs of a lack of confidence such as:
- Mar 2009 - China calls for the creation of a new standard currency. http://online.wsj.com/article/SB123780272456212885.html
- May 2009 - Russia replacing the US dollar with the Euro as its basic reserve currency. http://www.globalresearch.ca/index.php?context=va&aid=13691

What to do
===========
In the unlikely event of catastrophic financial collapse, investment in stocks (except a few perhaps) will plunge. Property is in general illiquid. Cash and fixed income will be wiped out in the event of hyperinflation. So how exactly can we prepare before such a thing actually happens?

Somehow the most common answer always point back to gold, although there are suggestions of other precious metals like platinum. Only be wary that legislation may outlaw the ownership of precious metals like the Gold Reserve Act. Yet there are always exceptions, such as collectible gold coins. Feel free to share your ideas on what is the most affordable and practical ways of holding gold.

Given that such a dire scenario is almost unimaginable, there is still good reason to prepare for it since the consequence are so drastic. So how much should we put aside, perhaps translate into gold? My current thoughts are the equivalent amount of money enough to buy your family food and shelter for one year.


Disclaimer
===========
As with all articles in this blog, this is not meant to be financial advice. Rather it is just an expression of thought.

Technical Analysis - Dow and All Ords

For those following the Dow Jones and the All Ords index closely, you would have noticed the week before last that as the Dow powered on upwards, the All Ords retreated slightly for a few days before following the Dow again. But be mindful that those are daily trends. So let's look at what the weekly trend show us, in particular concerning the small pullback we had a few days ago.

Alert: Gann date 20 Nov!

Indeed there has been a minor dip or change in trend leading up to this date. Is this a trigger for a major reversal?

The weekly chart of the Dow Jones below is quite interesting. See how it has just reached and touching the Gann-5 line. Gann analysis does not claim that it will bounce back down or break through. What it does show us is to get us prepared, if it breaks this line strongly, then go long. On the other hand if it tumbles from this line, it may be a shorting opportunity. The breaking of the Gann-10 angle in May 2009, shows an example of how it can break the Gann angle.

Errata: The weekly charts of the All Ords for previous posts has an error where the 20max envelope was shifted. The new graph here has been corrected.

Turning back towards the All Ords, if you look at a recent daily chart (not shown here), you will notice the formation of head - shoulder pattern with the peaks at early Oct, early Nov and during the last week where the last shoulder might be forming. Looking at the weekly chart, over the last few weeks, the trend has come off the Gann+50 angle. Not only that, but the 20max envelope has also tapered off its rise. This pattern has occurred once before in the bull trend started at March 09, and that happened in early July 09. If it does follow the July 09 pattern, it will power on ahead. On the other hand the recent movement may be a good setup for a strong decline.

Analysis - GTG - Genetic Technologies

Source: http://ozstock.blogspot.com

Price($) 0.06
NTA ($) 0.04
P/NTA 1.57
Team 2.1
BurnPeriod 4.16
ProductPipe 15.9
ForeignMarket 7.8
Cash:Debt 20.07


GTG - Genetic Technologies was last analysed here at ozstock in June 27, 2007
(http://ozstock.blogspot.com/2007/06/analysis-gtg-genetic-technologies.html)
Since then a lot has changed for the company. We will start by looking at the figures, followed by a commentary of the company.

The company has a good record of maintaining very low debt. Although most startup biotechs have almost zero debt, relying purely on equity, GTG has ongoing operations and is not a startup. The amount of debt to finance its operations appears to be manageable. GTG has had strong cashflow from operations only for a brief period between Q4 2007 and Q1 2008 which was reflected in its share price which peaked at 55c compared to today's 5.6c. Its price to NTA is about 1.57 which is very favourable by Ozstock's standard while it has enough cash to burn for 4 quarters assuming cash burn is constant.

One of the original core focus of GTG is to license non-coding DNA and obtain licencing income. Its patent portfolio also covers international patents and hence the it reaches into foreign markets, hence the score 7.8. But the non-coding DNA licencing business has recently underperformed. Instead it appears GTG has diversified into related business of Cancer Screening, Animal genetic and fertility management and DNA Testing. This diversity has resulted in the Product Pipe score of 15.9. However, these businesses have yet to reverse the negative operational cash flow not to mention the significant annual losses. It has two research projects RareCellect and ImmunAid in which their developmental stages are not entirely clear.

To be frank, ozstock's interest in GTG was renewed by the recent announcement that GTG won the exclusive distribution agreement with Rosetta Genomics for Rosetta's microRNA testing. There are several key risks to consider in GTG, although its product pipe looks quite attractive. The risks include:
i) Products that have yet to provide convincing turnaround for the company.
ii) Board reshuffle resulting in a new combination of management team.
iii) Diversity of products may result in focussing on product with short term benefit at the expense of better long-term products.
iv) ability to remain a going-concern over the next 4 quarters.

Technical analysis alone has shown the share price hovering between 5c and 6c over the last few months, with the possibility of breaking the 6c in the next week. However, it would be prudent for the fundamental investor to wait for another 2 quarters of result to see evidence of a turnaround by the new management team.

ETFs: Buy Sell Indices and Metals on the ASX

Source: http://ozstock.blogspot.com

Update 2 Aug 2020

Technology ETFs:

ATEC - BetaShares S&P/ASX Australian Technology ETF

The index ATEC aims to track, the S&P/ASX All Technology Index.

The first ETF focused on providing access to Australia’s fast-growing technology sector and offers exposure to a diversified portfolio of dynamic ASX-listed tech players such as REA Group, Xero, Afterpay, WiseTech Global and carsales.com. 

ROBO - Invest in robotics, automation and artificial intelligence (RAAI) through the ETFS ROBO Global Robotics and Automation ETF. ROBO uses a full-replication strategy to track the index, meaning it holds all the shares that make up the index in proportion to their index weights. The index comprises up to 200 global companies related to robotics, automation, and artificial intelligence in areas such as manufacturing, 3D printing, logistics and security. 

Update 1 Aug 2015
ANZ Bank
ZGOL - Physical Gold
ZCNH - Physical Renminbi
ZUSD - Physical US Dollar

Exchange Traded Bonds / Fixed income
xtbs.com.au


Update 25 Nov 2012
ETF - UBS IQ Research Preferred Australian Share Fund. This ETF aims to replicate the performance of the UBS Research Preferred Index before fees and expenses. These are the shares that UBS has done research into, for their managed funds investments.


Update 16 Jul 2012
A few agriculture and metal commodities ETFs have been added to the ASX. A complete list of all ETFs can be seen at http://www.asx.com.au/products/managed-funds-product-list.htm
The agriculture commodities ETFs are:

ETPCMD - All Commodities (collateralised structured product)
ETPAGR - Agriculture (collateralised structured product)
ETPCRN - Corn (collateralised structured product)
ETPWHT - Wheat  (collateralised structured product)
ETPGRN - Grains  (collateralised structured product)

Metal Commodities ETFs:
ETPIND - Industrialised Metals (collateralised structured product)
ETPCOP  - Copper (collateralised structured product)

Energy Commodities ETFs
ETPNRG  - Energy (collateralised structured product)
ETPGAS - Natural Gas (collateralised structured product)
ETPOIL - Brent Crude  (collateralised structured product)

Update 11 Apr 2012
Some high dividend yielding shares are:
VHY - Vanguard Australian Shares High Yield
SYI - SPDR MSCI Australia Select High Dividend Yield
RDV - Russell High Dividend Australian Yield
IDF - iShares S&P / ASX High Dividend

Updated 22 Sep 2013
More high income ETFs
YMAX -BetaShares Australian Top20 Equity Yield Maximiser
IHD - iShares S&P/ASX High Dividend ETF
SYI - SPDR MSCI Australia Select High Dividend Yield
VHY - Vanguard Australian Shares High Yield ETF

6 Nov 2016
HSVT Betashares Australian Dividend Harvester
WDIV SSgA S&P Global Dividend



Update 24 Apr 2012
A very comprehensive list of ETFs available in Australia can now be found at the Australian Stock Exchange ASX at: http://www.asx.com.au/products/managed-funds-product-list.htm
Just click at the "ETFs and ETCs" item at the website above.


Update 17 Sep 2012
Fixed Interest or Bonds ETFs are now available in the Australian market. More will be added soon, but here the few that are recently made available:

IAF - iShares UBS Composite Bond - fee 0.24%. The Fund invests primarily in investment grade fixed income securities issued by the Australian Commonwealth Government, Australian State-Governments, Supranational and Sovereign agencies and corporate debt issues that form the Index, and seeks to achieve its objective by employing an optimisation (stratified sampling) strategy to track the performance of the Index.

IGB - iShares UBS Treasury - fee 0.26%. The Fund invests primarily in investment grade fixed income securities issued by the Australian Commonwealth Government that form the Index, and seeks to achieve its objective by employing a full replication strategy to track the performance of the Index.

ILB - iShares UBS Government Inflation - fee 0.26%. The Fund invests primarily in investment grade fixed income securities issued by the Australian Commonwealth Government and Australian State-Governments that form the Index, and seeks to achieve its objective by employing an optimisation (stratified sampling) strategy to track the performance of the Index.

AAA - Betashares Australian High Interest Cash

Russell has also launched three fixed-income ETFs (updated 8 July)
RGB - Russell Australian Government Bond ETF - fee 0.24%
RSM - Russell Australian Semi-Government Bond ETF - fee 0.26%
RCB - Russell Australian Select Corporate Bond ETF - fee 0.28%


BOND - SPDR S&P/ASX Australian Bond Fund. The Fund seeks to closely track, before fees and expenses, the returns of the S&P/ASX Australian Fixed Interest Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking and lower costs.

GOVT - SPDR S&P/ASX Australian Government Bond Fund. The Fund seeks to closely track, before fees and expenses, the returns of the S&P/ASX Government Index. Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking and lower costs.

GGOV - BetaShares Global Government Bond 20+ Year ETF – Currency Hedged

GGOV’s strategy is to invest in a portfolio of long-maturity bonds issued by governments of the G7 nations (USA, Japan, Germany, United Kingdom, Italy, France and Canada). Exposure is hedged into AUD.   Update 2 Aug 2020

Update 1 Aug 2015
VAF - Vanguard Australian Fixed Interest
VGB - Vanguard Australian Government Bond Index Fund

IHCB - iShares Global Corporate Bond (Hedged)  6 Nov 2016






Update 7 Feb 2012

QAG - ETF Betashares Agriculture - Currency Hedged - Synthetic
The Fund seeks to track the performance of the S&P GSCI Agriculture Enhanced Select Index Excess Return ("Index") hedged into Australian dollars, plus an interest component, before fees and expenses.

QCB - ETF Betashares Commodities Basket - Currency Hedged - Synthetic
The Fund seeks to track the performance of the S&P GSCI Light Energy Index Excess Return ("Index") hedged into Australian dollars, plus an interest component, before fees and expenses.

QCP - ETF Betashares Copper Index - Currency Hedged - Synthetic
The Fund seeks to track the performance of the S&P GSCI North American Copper Index Excess Return ("Index") hedged into Australian dollars, plus an interest component, before fees and expenses.



Update 15 Jan  2012
USD - BetaShares US Dollar ETF - If US$ goes up against AU$, then buy this. If US$ goes down against AU$, then sell this.
EEU - Beta Shares Euro ETF
POU - Beta Shares British Pound ETF

These currency ETF were introduced on Feb 2011. They allow for trading currency with much smaller cost than just buying and selling currency from banks or currency exchanges. The USD is supposed to hold actual US dollars in a JP Morgan Chase deposit account according to Money Magazine Dec 2011 issue.

OOO - Beta Shares Crude Oil ETF - also available. It tracks the Crude Oil Index which follows the West Texas Intermediate Crude Oil futures. This ETF is hedged.



Update 8 May  2011
AVOID buying the following ETFs if you don't want to be highly leveraged or speculative (see explanation soon)
QFN - BetaShares S&P/ASX 200 Financial Sector ETF
QRE - BetaShares S&P/ASX 200 Resources Sector ETF
by BetaPro management. There may be more of these coming......


The ETFs above are called synthetic ETFs. They are a new kind of ETFs which are partly composed of derivatives. This is unlike original ETFs which track their index by trading actual shares that the index is made up of. The original ETF is copying the index so it lets investor trading the index itself - what you see is what you get - and there are little surprises. The synthetic ETFs attempt to create the same movement as the underlying index, but actually make up of more exotic instruments such as derivatives. The risk profile is therefore different for the synthetic ETFs and their index. It will be particularly serious if market movement is so severe, such that the derivatives effect is even more severe, causing the companies backing synthetic ETFs to fail. In such cases the synthetic ETFs may collapse. This is an extreme but not impossible scenario.



Update 12 Dec 2010
iShares has recently added four more ETFs for Australian investors. The four ETFs are:


IOZ  iShares MSCI Australia 200
Aims to track the performance of the MSCI Australia 200 Index investing in the 200 largest companies in Australia.

ILC  iShares S&P/ASX 20
Aims to track the performance of the S&P/ASX 20 Index investing in the twenty largest blue chip companies in Australia.

IHD  iShares S&P/ASX High Dividend
Provides exposure to 50 large Australian companies with a particular focus on higher dividends

ISO iShares S&P/ASX Small Ordinaries
Aims to track the S&P/ASX Small Ordinaries, an established index which represents small cap companies in Australia



Original Post
Over nearly the last 2 years, mum and dad investors as well as professional investors may heve been burned by the GFC - Global Financial Crisis. For most, it is bad enough that the shares in companies crashes, but for others trading derivatives like options, futures and CFDs (Contract For Difference) the exposure to individual companies may have been worse.

For some companies the share prices not only crashed but the companies themselves collapse and investors (non-creditors) usually get nothing. But even in the doom and gloom, some companies or sectors fare better than others.

One way to mitigate company risks is to buy or sell stock indices, like the S&P 500. This is not about trading in leveraged derivatives like options or futures, but rather trading in actual units of the indices. This is called Exchange Traded Funds or ETF in short.

ETFs are not only for stock indices, they also exist for commodity indices. Below is a list of the ETFs available to buy and sell just like a regular unit of share, in the Australian Stock Exchange (ASX), along with their respective ASX code.


Metal Commodities
GOLD Gold Bullion
ETPMAG Silver
ETPMPD Palladium
ETPMPT Platinum
ETPMPM Precious Metal Basket

State Street's Domestic Equity (started about 2001)
SFY SPDR S&P/ASX 50
STW SPDR S&P/ASX 200
SLF SPDR S&P/ASX Listed Property Funds

(iShares started about 2007)
International Emerging Nations Equity (as classified by iShares)
IZZ iShares FTSE/Xinhua China 25
IBK iShares MSCI BRIC
IEM iShares MSCI Emerging Markets
IKO iShares MSCI South Korea Index Fund
ITW iShares MSCI Taiwan

International Developed Nations Equity (as classified by iShares)
IVE iShares MSCI EAFE Index Fund - European, Australasian and Far East markets
IHK iShares MSCI Hong Kong Index Fund
IJP iShares MSCI Japan
ISG iShares MSCI Singapore Index Fund
IAA iShares S&P Asia 50
IEU iShares S&P Europe 350
IOO iShares S&P Global 100 - multinationals $US5bn+ cap
IXI iShares S&P Global Consumer Staples
IXJ iShares S&P Global Healthcare
IXP iShares S&P Global Telecommunications

US ETFs (iShares)
IVV iShares S&P 500 US large cap stocks
iHVV iShares S&P 500 AUD Hedged (US Exposure)  6Nov 2016
IJH iShares S&P MidCap 400 US stocks
IJR iShares S&P SmallCap 600 US stocks
IRU iShares Russell 2000 US small cap stocks


(Vanguard started about 2009)
VAS Vanguard Australian Share Index ETF - top 300 Aust shares
VTS MSCI US Broad Market Index - overall US mkt
VEU Vanguard all world, ex US, Shares Index
VAP - Vanguard Australian Property Sector Index   Updated 8 Dec 2014
DJRE - SPDR Dow Jones Global Real Estate Fund    Updated 26 Apr 2015
VGAD Vanguard MSCI Index International Shares Hedged    6Nov 2016




Please let me know if you know of any ETFs trading in the ASx which are not listed here.

Note that a small amount of management fees may be build into the prices of these ETFs. In addition, foreign exchange rates also affect the prices. One example is today's Gold price is USD $942/oz but the ETFs GOLD share is AUD $114.6. However, ETFs seem to be as close as we can get to actually trading indices and commodities without actually trading the physical stuff.

Technical Analysis (Gann Charts) - Dow and All Ords Nervous

It's been some time since I last put up the monthly graphs and I just thought it was time to revisit both monthly and weekly graphs.




Things to note from the All Ords monthly graph:
i) x=80 is March 1991 and x=280 is Nov 2007
ii) The two gradients Gann +7.5 and Gann+10 has acted as an envelope for most of the 1990s decade.
iii) The period of early 2000s saw the irrational exuberance indicated by the large peak breakout of the envelope.
iv) The GFC made a low but supported by the Gann+7.5 line. The bull run from March 2009 until now saw it rising steeply from the Gann+7.5 and is now just over the Gann+10.
v) Big question is will the Gann+10 act as a resistance or will it break through? The key is to wait for a definite signal.

It is interesting to note that the Gann angles not only act as "Barriers" (ie resistance or support lines) but also as a "Tracker" where the graph actually fluctuates along it.



On the Weekly All Ords graph - If you have been following my blog, about two article ago, I wrote on the "Squaring of Time and Price of the Global Financial Crisis GFC" (Sep 2009). In that article I found that a factor of 52 was key to revealing the square relationship between time and price. So for this Weekly graph, you will notice that I changed the Gann-32 line into a Gann-50 line (tracking the GFC down) and added a Gann+50 line (tracking the post March 2009 recovery). I used 50 because I did some recalculation and the results were better than 52, not to mention 50 is a nice round number.

The result of these changes (compare with previous blogs) is that the new Gann+/-50 track the graph even better. We can use this graph to confirm a change in trend if the current bull run is to end.



On the weekly Dow Jones, we see the graph approaching the Gann-5 and there's no reason why it should not at least touch that line before any pullback. The intersection between Gann-5 and Gann+10 would be interesting to watch.

The recent bull run has gone on for almost 8 months. The bears have become bulls while the bulls have become a little nervous. Many are expecting a pullback of some degree. However, the weekly graphs based on the Gann angles shown here do not indicate any strong resistance soon, with the exception that the monthly All Ords just broke through and important resistance. The market has dropped in the last few days but the key is to wait for confirmation of trend if we are to jump in the opposite direction.

Notes on the Techniques of W.D. Gann

1. Special Number Sequences

1.1 The Full Circle 360

To some, there seems to be something magical about the circle in the way it stands for completeness and repeatability. But putting all mysticism aside, a circle has 360 degrees. Mathematically, there are many consequences that follow from the completeness and repeatability of a circle. Any high school student would have seen how a sine wave is traced out by a circle.

Sequence 1: Circle-16ths

A circle can have its angles equally divided into 4, 8 and 16 as

Degrees         0.0   22.5   45.0   67.5   90.0   112.5   135.0   157.5   180.0   202.5   225.0   247.5   270.0   292.5   315.0   337.5   360.0

Percentages   0.0   6.25   12.5   18.75  25.0   31.25    37.5   43.75    50.0    56.25   62.5    68.75    75.0    81.25   87.5     93.75   100.0

Sequence 2: Circle-12ths

A circle can have its angles equally divided into 3, 6, 12 as

Degrees         0.00   30.0   60.00   90.00   120.0   150.0   180.0   210.0   240.0   270.0   300.0   330.0   360.00

Percentages   0.00   8.33   16.67   25.00   33.33   41.67   50.00   58.33   66.67   75.00   83.33   91.67   100.00

Gann used the Circle-16ths sequence quite often. Why should the numbers in Circle-16ths be so special in the squaring of Price and Time? The reason is that the US dollar is divided into quarters, and not too long ago it had 1/8ths. The stocks in US are also denominated in fractions of 1/4, 1/8 etc. Hence it is natural to use this division. In angles terms, they are represented by 22.5, 45.0, 67.5, 90.0 degrees and so on.

1.2 Seasonal Time Periods

The year starts on March 21 which is the start of Spring Season. The important intervals are:

    May 5  ends   1/8   or 6 1/2 weeks from   March 21 

    Jun 21  ends   1/4   or 13    weeks from   March 21

    Jul  23  ends   1/3   or 17    weeks from   March 21

    Aug 5   ends   3/8   or 19 1/2 weeks from   March 21

    Sep 22 ends   1/2   or 26      weeks from   March 21

    Nov 8   ends   5/8   or 32 1/2 weeks from   March 21

    Nov 22  ends   2/3   or 35     weeks from   March 21

    Dec 21  ends   3/4   or 39     weeks from   March 21

    Feb 4    ends   7/8   or 45 1/2 weeks from   March 21 

    Mar 20  ends   1 year or 52     weeks from   March 21

Technical Analysis - Summary of MACD

Below is a summary of the MACD technique to watch for confirmation in trends and possibly reversal in certain circumstances. The following is an excerpt from Andrew Page's article from Trading Tutors.

1. The MACD line signals upward momentum when in positive territory, and downward momentum when negative. Use this to validate an observed trend in price.

2. The MACD line can signal overbought and oversold positions. The further the line deviates away from zero, the more likely it is we will see a correction in price. Try drawing support and resistance lines for you MACD line to work out what levels typically represent overbought / oversold positions.

3. Buy signals are generated when the MACD line crosses above the signal line. Buy signals are reinforced when the MACD line is in positive territory.

4. Sell signals are generated when the MACD line crosses below the signal line. Sell signals are reinforced when the MACD line is negative.

5. Divergence between the price and MACD histogram signal weakness in the trend (loss of momentum). When you start to see the two diverge, look to the other MACD signals to confirm the end of a trend.

Squaring of Time and Price of the Global Financial Crisis GFC

Source: http://ozstock.blogspot.com

Here is some quick calculations I tried after reading about Gann's technique of squaring Time and Price. It is quite amazing to see how the numbers fall into place. For both the Dow Jones and the All Ordinaries Indices, the calculations are below:

Market Peak at: 8 Oct 2007
Market Bottom at: 2 Mar 2009
Time Difference = 73 weeks

All Ordinaries
High: 6760.1
Low: 3111.7
Difference = 3648.4
Difference divide by 52 = 70.16

Dow Jones
High: 14093.08
Low: 6626.94
Difference = 7466.14
Difference divide by 52, then divide by 2 = 71.8

The Time difference between high and low is 73 weeks. The Price difference for the All Ords is 70.16 (weeks) and Dow Jones is 71.8 (weeks). Both indices are so close to 73 weeks. For those new to Gann analysis, 52 is one of those magic numbers. In Gann's Master Calculator, he often use the square of 52. The number 52 comes from the fact that there are 52 weeks in a year and the data are based on weekly data.

Essentially, the Price is being rescaled by a logical factor which is 52, or a multiple of 52 as in the case of the Dow Jones. I am quite surprised that the numbers turn out so close.

The above analysis was possible because we looked at the past and identified the high and low point. For the future, we cannot really see the next high which started from the low of 2 March 2009. However, we can use the same scaling and perhaps suggest where the current rally may turn down.

Technical Analysis (Gann Charts) - Dow and All Ords Stumble

Source: http://ozstock.blogspot.com

Here is the next monthly update on the Dow and All Ords using Gann angles to analyse future trend. Before looking into the charts, a quick check of the Seasonal Time Periods from Gann shows that we are nowhere close to any important dates. We are now between the August 5th and the September 22 dates (see future blog for complete Seasonal Time Periods)

Firstly, looking at the All Ords, the last 4 weeks has clearly broken the Gann +1/2 angle, question is if it will drop down. The past 4 weeks have also convincing broken the Gann -32 downtrend line and has pushed the 20 day moving average envelope to the limits. So this has been a strong trend that may retrace back to the Gann +1/2 but currently there is no evidence to suggest a stronger, longer pullback although the news seem to suddenly turn negative in the media.



Secondly, the Dow show a similar behaviour, in the past 4 weeks, it convincingly broke the Gann -10 downtrend angle. It may still plunge towards the intersection of the Gann -10 and Gann +10 angles but there is no current evidence to support this. It is also between the two major uptrend Gann angle of Gann +10, Gann +20. Should the upward trend continue, the Gann -5 downtrend angle may be a good reference to look for.



This week will see many Australian companies release their annual results. This will truly test the sentiment and so even though the trend is strongly upward over the last 4 weeks, the fundamentals may have a say this week.

Technical Analysis (Gann Charts) - Dow and All Ords refuses to fall

Source: http://ozstock.blogspot.com

About a month ago, my article (in June) was titled "All Ords headed for June fall?" As you may have guessed, I am bearish, and in the market following my own advice last month. The market actually dropped for a few weeks as forecasted by previous blog, but my mistake was not using a stop loss. Over the last week the market surged strongly. Let's have a look at what the Gann angles say.



Looking at the All Ords graph first, I've added a new (Green line) angle of ratio 32:1 downwards from the 2007 all time high. The angle gradient of 32 is a power of 2, and I've tried others like 16:1, 8:1 and they were quite far off so I settled on 32:1. But see how it turn out to be a resistance angle to the previous rallies since Oct 2007?

Looking closely, it turns out the June fall hugged the 32:1 angle closely and the recent surge broke the resistance emphatically. In absolute terms, the rise is quite small, but the fact that it broke the line warrants further watch, or even good reason to speculate of further rise.




It's only now after the new green line (32:1) has been added to the All Ords, that I realize the Dow Jones chart's pink line marks out a very similar trend. In the Dow Jones chart, the June fall and mid-July rise follow the same pattern along the Gann -10 line as the All Ords. The resistance is not only broken but appears prominently on the up side.

In summary, if the current rise in the market can be sustain for at least two weeks, there is a good case for a strong rally in this bear market.

Warren Buffet's 1981 Formula for quick valuation

http://ozstock.blogspot.com

Here is a short technical note Warren Buffet's 1981 formula. I came across this from the Money Magazine, June 2009 issue. Hence I do not guarantee that Money Magazine's content is correct or even if this is truly a formula used by Warren Buffet. However, after analysing the formula for myself, I see the merit of it. In fact I will be including this so called Buffet's 1981 formula in my future article which explains my 3-fold Valuation method to decide on buying stocks.

The Buffet's 1981 formula is this:

Value = (ROE / Required Return) x Equity Per Share

where
ROE = Rate of Return of the Company of interest (in %). This can be calculated using Net Profit After Tax divided by Total Equity.

Required Return = Pre-tax required rate (in %) that you would like to get for your investment. For example you may wish to use a long term deposit or long term government bond rate for this.

Equity Per Share = the Equity of a company divided by the total number of shares. These figures can be obtained from the company's annual reports.

This is a quick and simple way to value a company, to see if the company is priced more or less than it is of value to you. Your input comes into the Required Return where you can choose how much you expect from this investment.

Then the formula will produce the value of the company per share. Simply compare this with the current price to see if it is over or under priced. Using this model, a company that can generate a higher return on equity is worth more than one that cannot. Also a company that generates a high ROE and is able to retain all of its earnings and continue to make higher returns, is worth more than a business with the same ROE but forced to pay most of its earnings out as dividends.

ETFs: Buy Sell Indices and Metals on the ASX

see

http://ozstock.blogspot.com/2009/11/etfs-buy-sell-indices-and-metals-on-asx.html

Technical Analysis (Gann Charts) - All Ords headed for June fall?

Source: http://ozstock.blogspot.com

After one of the strongest rally in recent times, are we headed for a June Fall? What do the Gann angles tell us?
Below are the weekly graphs for the Dow Jones Industrial and the All Ordinaries indices, with some Gann angles superimposed.

The story so far is that since the March bottom, stock indices all over the world has been rising until May. The "sell in May and go away" adage did not exactly come through. So what do the Gann charts tell about this?



Looking first at the Dow, the Gann-10 (brown) ascending angle, and the Gann-10 (pink) descending angle is projected to meet sometime in mid August. Since the all time high of 2007, the Gann-10 (pink) has acted as a resistance angle. The last 2 weeks saw the Dow break this resistance angle, but have not reached a significant amount yet. The current week starting 15 June 2009, has begun with a significant drop. One scenario, if you believe it, is that the Dow will retrace downwards along the Gann-10 (pink) and meet the intersection point almost creating a double bottom before starting the next bull run. Two angles from opposite direction intersecting like the Gann-10 pink and brown here, is an important point to watch for.




The All Ords seem to be telling a different story but not that much. One of the important Gann angles Gann-2.3 has acted as a support and the All Ords bounced quite definitively from this. It is now approaching the Gann-1/2 angle which may possibly act as a resistance. Note the Gann-1/2 is drawn from a recent low of 2003 whereas the Gann-2.3 originates from a low point farther back. This prediction may be far off but, if the All Ords finds resistance at the Gann-1/2 as the recent falls in the market continue, it may hit the Gann-2.3 support again. If this is the case, it may set-up for a double bottom to bounce back as the next long term bull rally - which in fact may coincide with the Dow.


Outlook: Brace for a sustained and signicant fall, then recovery from early to mid August.


Aside: Jun 21 is one of the 11 important Gann seasonal dates in the year that trend may change - Lookout!

Lightning Analysis - ADE - Adelaide Energy

Lightning Analysis - Adelaide Energy

This is a very quick look at Adelaide Energy following a positive speculative news article recently.

http://www.news.com.au/adelaidenow/story/0,22606,25200329-913,00.html

http://www.theaustralian.news.com.au/story/0,25197,25444885-23634,00.html

Read those articles for yourselves - my impression from them is that ADE is a good speculative punt. However ......

I started looking at some fundamentals and technicals. Please note that this not meant to be a thorough analysis. But my quick calculations tells me that I would not be touching this stock no matter how good the news is until they get some more cash.

From their recent quarterly statement:
Revenue: $406K - first revenue after their purchase of Katnook Gas Plant from Origin.
Operational Cashflow: -$950K
Investment Cashflow : $1.083m
Cash at end of quarter: $409

Assuming the investment income is once off, and assuming revenue will be steady, if operational cashflow remains similar, say $900K, then ADE won't have enough cash to last the next quarter. At this point, I would stop all further analysis and wait at least to the next quarter results.



In terms of technical analysis, a simple Gann analysis would show that current price has almost reach the level of the last significant high at around 15c. Also that high point is about 11month to 1 year ago - another signficant time period in Gann analysis. This is a point to pause and see if it will break out of the resistance level and go higher.

In summary, although prospects of ADE sounds good, both fundamental and technical indicators suggest waiting before buying into it.

Technical Analysis - Update Dow and All Ords Weekly Gann Charts

It is about 2 months since the last post on the analysis on the Dow Jones index and the Aussie All Ords index. In that time, the market has climbed significantly on renewed confidence. The consecutive weekly gains left such an impression on some that there is talk that we have reached the bottom of the GFC (Global Financial Crisis). Instead of random speculation, let's turn to our weekly charts.

In the previous post,
http://ozstock.blogspot.com/2009/03/technical-analysis-update-dow-and-all.html
the DOW seem to be right in between a set of Gann bear angles and bull angles. The All Ords at that time was testing an important angle for support.







In the current situation, the All Ords seemed to have not only found the support but has bounced up from it. The Dow stopped in the middle of the 2 angle supports and also bounced upwards strongly.

So are there any indications of support or resistance in the near future? Looking at the Dow first, it is almost at the point of touching the (pink) angle from the top of the 2007 boom, which is a potential resistance. For the All Ords, although it has crossed over the support angle emphatically, it is approaching the top of the 20 day maximum envelope, almost like being sandwiched between the support angle and the envelope.

Two other historical pattern to note are: i) the "Sell in May" adage; ii) the Gann seasonal date of May 5, both of which is acting against the current trend.

Money Management as Your Trading Account Grows

This is taken from: http://www.hubb.com.au/tradingtutors/emails/2009/TradingTutorsEmail_020409.asp

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One of the reasons that traders tend to overtrade is that they are trying to make too much money, too quickly, with a trading account that is too small.

During the online training sessions I run for new Safety in the Market students, I ask students to think about the financial goals they are trying to achieve from their trading during the year.

For example, let’s assume you aim to make $100,000 per year from your trading.

You have a $5,000 trading account, you will risk 5% of the account per trade and will aim to achieve a minimum of a 2 to 1 Reward to Risk Ratio. This means that your losses should be no more than $250 per trade (including brokerage) and your profits should be at least $500 per trade (after brokerage).

I encourage students to focus on 10 trades at a time. It doesn’t matter whether you take those 10 trades in one day, one week, one month… Just take 10 consecutive trades, and focus on the results. I suggest that new traders aim to have 4 winning trades, 4 losing trades, and 2 “breakeven trades” out of every 10 trades they take.

What does this mean for our trading account? Well, the 4 winning trades should return at least $2,000 (4 x $500). The 4 losing trades should lose no more than $1,000 (4 x $250). The 2 breakeven trades cost us nothing.

If you can achieve this mediocre success rate of 4 winning trades out of 10 with a conservative 2 to 1 Reward to Risk Ratio, then every 10 trades would be worth $1,000 to you.

This gives you a 20% return on your trading capital. Not bad.

So to make $100,000 profit, you would need to take 1000 trades (100 x 10).

We set our target low because if we know that 4 winning trades out of 10 will help us reach our goals, we don’t mind if the first two trades, for example, are losing trades, because we can see the big picture.

Contrast this with aiming for 7 out of 10 winning trades – if your first two trades lose, you can start to panic, and take trades that you shouldn’t.

You then need to ask yourself whether it is safe and reasonable to make 1000 trades during a year – after all, this equates to around 4 trades per trading day.

The answer for most people is probably not.

So we need to adjust the parameters of our trading system.

Many traders will look to increase their risk size – and maybe start risking 6% or 8% or 10%, in order to get where they want to go faster. This is dangerous and can lead to serious depletion of your trading capital if you have a bad run.

Or, they will aim for a higher success rate. While this is a good idea, the reality is it can take a few years in the market before you have the experience to be making, say, 7 winning trades out of 10 consistently. If you aim too high too early, you can find yourself disappointed, and “chasing” extra trades as you play catch up.

I suggest students work out a compounding plan instead.

For example, maintaining the same parameters as above, we know that every 10 trades are worth $1,000. So after 50 trades, we would expect our trading account to double in value from $5,000 to $10,000.

We can now risk $500 per trade, which is still only 5% of our new trading balance of $10,000.

Now every 10 trades is worth $2,000, so 50 more trades would see us at $20,000.

By risking 5% of $20,000, or $1,000, each 10 trades should now be worth at least $4,000 to us, so 50 more trades would see us at $40,000.

Risking 5% of $40,000, or $2,000, each 10 trades should now be worth at least $8,000 to us, so 50 more trades would see us at $80,000.

30 more trades from here would see us make $24,000, giving a profit of at least $99,000.

So by increasing our position sizes as our account grows, you can see that we can still risk 5% per trade, still only require a mediocre 4 wins out of 10, and still make around $100,000 profit in 230 trades.

230 trades in a year is less than one trade per day – this is far safer and far more achievable than taking 1000 trades in a year.

Remember too that 5% loss is our maximum loss, and 2 to 1 is our minimum reward. And we may well do better than 4 winning trades out of 10. In this case, we would achieve our final target well before 230 trades.

The point is, we have a minimum standard to aim at, and we know that if we reach this standard, it is simply a matter of finding and executing 230 trades in a year.

Having this rock solid plan in place will help to keep you from over trading, and help keep you focused on your goals.

Trading is a business – treat it like one.

Be Prepared!

Mathew Barnes

News - World's 50 Safest Banks - according to Global Finance

Here is the excerpt from Global Finance Magazine - Feb 2009

-------------------------------
New York, February 25, 2009 — Such has been the turmoil in the world’s banking industry that, for the first time, Global Finance magazine is publishing a mid-year update of its much-respected Safest Banks listing. A full report on the list will appear in the April issue of Global Finance.The “World’s 50 Safest Banks” 2009 were selected through a comparison of the long-term credit ratings and total assets of the 500 largest banks around the world. Ratings from Moody’s, Standard& Poor’s and Fitch were used.

Global Finance has published its “World’s SafestBanks” listing for 17 years and this ranking hasbecome a recognized and trusted standard of credit worthiness for the entire financial world. “The rating agencies have determined these banks have demonstrated a more prudent and sustainable approach to risk than their peers,”says Global Finance publisher Joseph D.Giarraputo. “More than ever customers all around the world are viewing long term credit worthiness as the key feature of the banks with which they do business.”

1.KfW(Germany)

2.Caisse des Depots et Consignations (CDC)(France)

3.Bank Nederlands Gemeenten (BNG)(Netherlands)

4.Landwirtschaftliche Rentenbank(Germany)

5.Rabobank(Netherlands)

6.Landeskreditbank Baden-Wuerttemberg-Foerderbank(Germany)

7.NRW. Bank(Germany)

8.BNP Paribas(France)

9.Banco Santander(Spain)

10.Royal Bank of Canada(Canada)

11.National Australia Bank(Australia)

12.Commonwealth Bank of Australia(Australia)

13.Banco Bilbao Vizcaya Argentaria (BBVA)(Spain)

14.Toronto-Dominion Bank(Canada)

15.Australia & New Zealand Banking Group(Australia)

16.Westpac Banking Corporation(Australia)

17.Banco Espanol de Credito S.A. (Banesto)(Spain)

18.ASB Bank Limited(New Zealand)

19.HSBC(United Kingdom)

20.Credit Agricole(France)

21.Wells Fargo(United States)

22.Nordea Bank(Sweden)

23.Scotiabank(Canada)

24.La Caixa(Spain)

25.Svenska Handelsbanken(Sweden)

26.US Bancorp(United States)

27.Banco Popular Espanol(Spain)

28.DBS Bank(Singapore)

29.Pohjola Bank(Finland)

30.Deutsche Bank(Germany)

31.Société Générale(France)

32.Intesa Sanpaolo(Italy)

33.Bank of Montreal(Canada)

34.DnB NOR Bank(Norway)

35.The Bank of New York Mellon(United States)

36.Caixa Geral de Depositos(Portugal)

37.United Overseas Bank(Singapore)

38.OCBC(Singapore)

39.Axa Bank Europe(Belgium)

40.Credit Suisse Group(Switzerland)

41.Landesbank Baden-Wuerttemberg(Germany)

42.Nationwide Building Society(United Kingdom)

43.CIBC(Canada)

44.National Bank Of Kuwait(Kuwait)

45.Barclays(United Kingdom)

46.UBS(Switzerland)

47.JPMorgan Chase(United States)

48.Bank of Tokyo-Mitsubishi UFJ(Japan)

49.Banque Federative du Credit Mutuel (BFCM) (France)
50.Credit Industriel et Commercial (CIC)(France)

--- Global Finance magazine February 25, 2009 ---

Technical Analysis - Update Dow and All Ords Weekly Gann Charts

As an update to the charts published near the start of December, we again look at the weekly charts for both the Dow Industrial Averages (DJIA) and the Australian All Ordinaries (XAO). The DJIA has broken through the important angle and is heading steeply downwards to the next bear angle. If it continues at the current rate, it may reach 5800 later in March or early April.

The XAO so far does not seem to follow the steep decline although it too has recently broken a support angle and downward movement is likely. The next support line (Yellow) is some way off. At this time, it is harder to make a call for the XAO - it depends on how deep the DJIA falls and how much influence it has on the XAO.

News - More Commodities at the ASX

Commodities besides GOLD can now be traded on the Australian Stock Exchange ASX. The links below may be helpful. http://www.asx.com.au/about/pdf/mr_020209_new_commodities_aqua.pdf http://www.asx.com.au/professionals/quoting_investment_products/

The symbols for the 3 new commodities are:
ETPMPT Platinum
ETPMPD Palladium
ETPMAU Silver

Not sure if they are available to retail investors or large investors / managed funds only. Details are still sketchy.

Please feel free to Post Comments if you have more information. Thanks

List of Blue Chip Companies - Argo Investments

The purpose of this article is to show a list of blue chip companies being invested by Investment Companies - in this case - Argo Investments.

Picking blue chip companies are easy or hard depending on who you are. If you are new to the market, the fact that there are over a thousand companies in the Australian sharemarket makes it a daunting task to even start analysing. Why not look at what the experts are investing.

Currently, the bear market is over a year old - and most people recognised this is going to be one of the worst economic downturns in history. Yet in terms of the sharemarket, clever investors are preparing to dive back in any time now, waiting for the signal that the market has bottomed. Even when the share market starts picking up again, the economy will be in the middle of a great struggle. Companies that are able to survive will be the blue chip companies that keep on producing and coming out of the recession strongly. So that is why we are focussing on blue chips.

Argo investments have been around for more than a decade. While I have not done a thorough analysis, it has done relatively well in the six months to 31 Dec 2008. I present here the list of principal investments of Argo Investments as a guide and starting point for picking blue chip companies.

BHP Billiton Ltd. 12.78%
Westpac Banking Corporation 8.81%
Telstra Corporation Ltd. 7.10%
Macquarie Group Ltd. 6.78%
Milton Corporation Ltd. 6.68%
Woolworths Ltd. 6.09%
National Australia Bank Ltd. 5.90%
Australian United Investment Company Ltd. 5.30%
Origin Energy Ltd. 5.18%
QBE Insurance Group Ltd. 4.51%
Australia and New Zealand Banking Group Ltd. 4.32%
Wesfarmers Ltd. 4.10%
Commonwealth Bank of Australia 3.77%
Rio Tinto Ltd. 3.54%
Woodside Petroleum Ltd. 3.07%
Westfield Group 2.75%
Foster’s Group Ltd. 2.44%
Santos Ltd. 2.37%
AMP Ltd. 2.29%
AGL Energy Ltd. 2.22%

Technical Analysis - Gann weekly 12Jan09 on Dow Jones and All Ords

Following from my post in early January in which both the Dow Jones (DJIA) and Australian All Ordinaries (XAO) were sitting on turning points, recent movement may confirm a break in the trend.

The Dow seemed to have broken the support angle Gann20 coming from the bottom. If so it may be heading down to another support line, perhaps Gann10 from the bottom (which is not plotted yet). It may also find support at the downward angle Gann10 (yellow line). Both of these support are a long way off, suggesting we may have a large drop to go.



The All Ords, since late November, has actually went down, touched the Gann2.3 (pink) support but has bounced up since Christmas. Although it does not seem to have broken the support at this point, rather it is still close to the support angle and thus waiting for the next break-out, we should consider what's happening in the US. If so, the recent break downwards in the Dow, would suggest the All Ords is most likely to break the Gann support and head further downwards.