Aussie Market Focus, March 18 2013. How far will the market fall?

By Kenneth Robson on March 19, 2013 • ( 0 )

Global market falls in the wake of Cyprus sovereign debt re-ignited fears of reversion to bear market mentality that prevailed between 2007 and 2012. Here in Australia the XJO fell by 102 points to be 5027. just above the 5000 support level.

Bearish fears re-ignited

This support could be tested in trading the rest of this week. The market response will be a test of the strength of the bullish mentality that emerged in the 2nd half of 2012, and has continued on into 2013.

This fall yesterday rekindled all the old bearish fears for traders, fears of the market plunging again to around 4000 points, and wiping out all the gains of the last 12 months.

Fear of the unknown is often responsible for investors making poor decisions.

Ffor this reason it is worth looking at how the market might respond in the next few weeks.

Technical considerations

On the Daily Chart there has been a 3-4 month impulsive move higher from

a low of 4334.3 on 16/11/2012
to a high of 5163.5 on 12/3/13

The last month this move has plateaued to be trading in a trading range between 5000 and 5150.

Direction will become evident if there is a break-out from this range. The likelihood in the present circumstances is for a break-out to the low side, i.e. through 5000 support. Otherwise the expectation is for trading to continue in this range.

Should this happen, one would expect between 33% and 66% of the previous impulsive move would be eroded, with clustering about the half-way mark.

Fibonacci retracement lines provide targets to monitor for investors.