The XAO was up today, +0.75%. Solid. It was, however an "inside day", not enough to reverse yesterday's down move.This means that the XAO found support at the 17 July low.
I think we can expect some more up movement. A test of the down trend line from early August is on the cards.
A move up above that would be bullish.
The Trin (a rarely discussed indicator in Australia) has broken below its up-trend line. The Trin reads inversely to the market. Down is good for the market. Up is bad.
Here's the formula for TRIM.
TRIN = ((Advancing issues/declining issues) / (advancing volume/declining volume))
Basically it's a sophisticated measure of breadth.
The Trin broke below its uptrend line yesterday and confirmed that with a further move down today. That's bullish for the market.
So - we now have a conflict. We have several classic indicators saying that a "sell" signal has been generated (see yesterday's blog).
Today we have a confirmed reversal signal by the Trin.
That conflict can be resolved by:
- a short term move up and a reversal off the downtrend line. (Proving the classic signals correct).
- Or a break of the downtrend line and proving the Trin correct.
I think the probabilities lie with Option 1.
Classic analysis has a long history of being right. Not always - but enough to give an edge.
A break below the current support level would be bearish - and a test of the July low (4200) will be a high probability.
Cheers
Red
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