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Index and Gold turning points

Australia 200 is showing signs of losing upward momentum around a key chart level while the rally in gold could turn out to be temporary.

Australia 200 Index

The Australia 200 index has managed to hold its ground through the CPI data, the FOMC meeting and now the Bank of Japan meeting.  However, as we move into the close of the week, it’s also showing signs of losing momentum at what could be a key chart level.

The early May peak at in the Australia 200 formed a classic AB = CD pattern. Here the 2nd, CD swing is basically the same length as the first AB swing. I’ve labelled these swings in black on the chart below.

Since Wednesday, the index has been hanging around the next ab = cd level. I’ve labelled this in red on the chart below. If it rejects this level by failing to move higher and then breaking the latest minor support, we could be in for a decent correction like we had in May/June.

If this doesn’t happen and the index pushes higher, another possibility to watch out for could be a rejection of the blue trend channel resistance that might set up for the next correction.

The market has rallied in anticipation of a rate cut next week and a steady profit reporting season complete with some encouraging outlook statements by management. It may need a bit more than this to sustain the current rally.



Last week’s low in gold looks like a rejection of support and the 38.2% Fibonacci retracement. Moves to the 38.2% level often turn out to be the first move in a deeper correction.

Now that this trend is showing itself to be in synch with Fibonacci retracement levels,  we could see  gold rally  to and then reject either the 61.8% or 78.6% Fibonacci retracement levels around $1351 or $1361. These are shown in blue on the chart below. A rejection of these retracement levels might set up for a deeper corrective downtrend, taking gold back below $1300

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