Euro Update

The accumulation that I flagged last week in the Index Report in the currency still appears to be going on. The present pattern that we have seen over the last week is one of exhaustion and the failure to reach down to the 1.3300 level during the last week is another indication that the Euro is oversold in the short term. With the performance and movement of Cable over the last week we could be seeing a switching out of being short the Euro into being short Cable. I would be cautious about being short at the moment.

QBE Insurance Update and View

QBE Insurance has been in a consolidation pattern for the last 4 months like the rest of the market. The stock is presently poised and is in an inverse head and shoulder pattern.

A break of Fridays high should see the neckline nicely broken on this inverse head and shoulders pattern and potentially target somewhere towards the $25.00 level.

The stock is currently trading on a attractive yield of 5.44% and with a price to earnings on just under 11 times the stock is not expensive compared to historicals.

Its something to watch closely over the next couple of weeks.

FTSE Index Update

We have had the FTSE break both the recent downtrends over the last 2 weeks and with the current higher high and the bounce from the 200 day moving average, it appears that the UK Index is now on the road for another run north over the coming weeks and months.

The 5 wave structure is the same as the ASX200 that I flagged earlier in the week. We are presently at a cross roads with the indexes. We could either see a retracement back to roughly 50% of the recent move up before going long again, forming an inverse head and shoulders pattern and then giving us a target just to the outside of the top of the trading range that we have been in for the last 4 months, or we could have a strong acceleration out of this pattern as short covering and new money flood into the markets.

Something to watch very strongly over the course of the next week or so.

ASX200 Index Update

The ASX200 Index has been waning of late and a lot of commentators are looking for lower prices, myself included up until recently.

The price action over the last couple of weeks has been struggling to go lower. Looking to the chart for the XJO we can see an inverted head and shoulders pattern marking the end of the downward movement. The market in June/June then broke the neckline and put in a target higher than it should have been. The period since September has been trading sideways and not really doing anything. For those of you that follow Elliot Wave theory, there are certain rules that the market is following at the moment. Wave 3 is typically the longest wave, but cannot be the shortest, and as wave 3 is clearly longer than Wave 1 this saying holds true. One of the other rules is that out of Waves 2 & 4, if one is a simple wave then the other must be complex. Wave 2 was simple due to the short sharp nature of the retracement, and wave 4 is complex due to the time taken and volatility during that time. Based on the pattern, the target for a wave 5 would be somewhere about 5400 or so. This coincides nicely with the fibonnaci targets as well.

So be wary of being too short this market at the moment.

Australian Stock Exchange - Company Update and View

Australian Stock Exchange has underperformed most of the other financial on the ASX200 over the last 12 months. It has fallen out of favour along with most of the other global exchanges.

The present yield and the near monopoly position that it enjoys makes it worthy of having a good look at it.

The present technical chart on the stock is very interesting. After such a protracted downleg and the consolidation that the stock has been subject too, a move above the $37.00 to $38.00 level could set it up for a very solid run over the course of the next 12 months. The solid consolidation basing pattern is a very good sign for the stock going forward.

National Australia Bank - Company Update and View

National Australia Bank has been held back recently against all the other banks due to it recent attempt to takeover of AXA.

There is strong dividend yield at present being at 5.92% fully franked and a very attractive Price to earnings of 9.39 times. The business is cheap on a global basis and Australian Banks are listed in the top ten banks globally. The present market Cap of $51 Billion is larger than Citigroup.

The takeover of the wealth management business AXA is important for the bank long term due to the wealth management component that it will add to National Australia Bank's already growing wealth management business and will help diversify away from the margin squeeze in the lending area.

As per the attached chart the stock is attractive and is over sold in the short to medium term basis. It would not take a lot for the stock to turn around.

Dow Jones Update

Looking at the Dow Jones at the moment, it appears that exhaustion is starting to come in on the downside. I have thought that that markets were overdone on the long side for a while now and have been of the opinion that the market could be going lower. The lack of conviction with the downturn is turning into the possibility that this is nothing more than a consolidation pattern. The 200 period moving average that was strong resistance mid last year, now could have the ability to be strong support. The level of bearishness out there amongst traders suggests that a lot of people are already short. Unless we see some major changes in the index over the next couple of days we could see a break of the trendline and the market move to the longside to complete a fifth wave.