SPI TRADING 31/8/07 06135 H6261 L6135 C6261
8 Period DM +34 -24 ADX 20, M/as 3/6170 5/6173 15/6003 30/6055

ASX 200 O6135 H6247 L6135 C6247
11 Period DM +25 -27 ADX 26 Falling, M/as 3/6160 5/6167 15/6010 30/6065

SPI Traders were well rewarded for trading this volatile trend using moving averages on the 5 minute chart which gave both long and short trades but best without overnight exposure.  The 30 period is one to follow – rule of thumb long trades when average is rising and short trades below a falling average.  Clusters of the 5/15/30 proved excellent entry points and big momentum moves.  Trading on last Thursday and Friday two good examples.  The P&F supports these patterns and gives good counts.  The chart illustration shows how using P.S. and ADX in the Directional Movement box where the crossovers capture the biggest part of the trend – a prime signal for locking in profits but not necessarily a signal to go short.  Friday P.M. a classic example of market continuing higher in late session trading from a triangle pattern also into Sycom.

The past three days action has provided some good trendlines on the half hourly chart and Friday’s breakout suggests that Fibonacci 78.6% targets in view – (1) Range close high = 6270  (2) Range high/low = 6221.  The emphasis is on letting the market dictate the trend – logic and news items tend to confuse. The technical signals are the way to go and M.A. Software is absolutely brilliant on 5 minute time frame.  Discipline to trading systems and money management is essential for SPI traders.  At times offshore action can be skittish but with that creates opportunities.

The half hourly chart on Friday had a resistance line which broke at 6190 at approximately noon and then the fast trend developed for the rest of the session. One of Gann’s teachings – not to ignore breaks of trend and angle lines.  The 5 period m/a is excellent for fast trends. Morning session with no index until mid-day created some uncertainty. Technical problems again!

Watch out for close prices on ASX 200 – they can be misleading signals at times. Top and bottom picking can be dangerous – the middle portion provides plenty of  movement with limited risk.  The consolidation periods tend of whiplash and give false signals.  Moving averages on index coming into play – the 3/5 together on Friday’s opening – long positions preferred when price above.

THE WEEK AHEAD:  Last week I outlined the important technicals – the 45 degree Resistance line held the downtrend until Friday and the Fibonacci 78.6% retracement came into play. Possible target areas for the current week – 88.6% retracement – one not generally known by the market but it is one mentioned by Fibonacci Forecaster as a probability retracement target – which would give 6341 for range close high/low and 6315 for range high low. This would also line up with a Gann 144 2mm square. possibly into Thursday time frame.

The 2 Pt. P&F chart on ASX 200 Index is quite an amazing one and has been since the last significant low 5484. It tested a Gann angle line at 6032 on 29/8 and hit it 3 times up to 31/8.  Well worth doing.

The Dow Jones continues to play an important role in market sentiment and we are coming up to an important time frame – 11 September – solar eclipse and also the 2001 anniversary well remember in stock market history. 21st September always an important Gann time.  What is interesting is the dates of the July highs and August lows for stocks, currencies and commodities mark the sentiment turns in this period of extreme volatility. The next bear signal is one to be obeyed!

I strongly suggest all traders should buy BREAKTHOUGH STRATEGIES FOR PREDICTING ANY MARKET – Charting Elliott Wave, Lucas, Fibonacci and Time for Profit by Jeff Greenblatt.  I was privileged to write the foreward for this remarkable book for 21st Century Technical Analysis.  I am now reading it for the third time and it is amazing how some of the points he makes become crystal clear in SPI trading.  Jeff has been distributing Fibonacci Forecaster as a free newsletter for four and a half years which is shortly to become a subscription one.  It promises to  be be one of the best newsletters in the globe if not the best for market timing.  In just two months since the book was published, sales have exceeded the “budget” for the whole year.  It is currently being printed in German.  Email: fibonacciman.com.  http://www.fibonacciman.com/