OK - Is this as bad as it gets? Maybe.Looking at the top chart, the All Ordinaries (XAO) appears to be in a gently sloping up trending channel. The chart is now testing the lower boundary of the channel.
The range of this drop is similar to the range of the drop back in October.
That movement may prove to be instructive. Not only is the drop in the current move similar in size - but up till now - it is also similar in structure.
Note - both moves began with an obvious drop followed by a small consolidation - then a much larger drop.
In October, the market then consolidated. The current market is now at that stage where a consolidation can be expected.
In October, the market then moved up after that consolidation.
If this market now consolidates and then drops - I think we can reliably say we have a trend change. If, however, it follows the October/November pattern - then the market is probably headed back up to the top of the channel.
The chances of at least a consolidation here are very high as the market is oversold with the RSI down at 32.5
So - we can look forward now to some chop - and then a decisive move, either up or down.
Of course the market might just surprise - and head straight back up or continue on straight down. Either way - if one of these happen - that should decide the matter of trend - bullish or bearish.
I tend to favour the up move either before or after a consolidation, it doesn't matter. More chop for the medium term investor, some relief from the angst of the long term investor - joy to the swing trader.
Cheers
Red
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