One could be forgiven for thinking we're just about to enter a full blown third world war, with the Sun trumpeting headlines like "hit the enemy" etc etc, and even the AFR headlining with "hunt on for Indon spy". Now why all of a sudden should we be looking for an Indon spy within government ranks ? It's all in the timing. The spin doctors are out if you ask me, fostering public opinion for the latest government actions.

Now what has this got to do with trading. Well, emotions manipulate us. Exactly what big headlines are designed to do. Don't trade on these emotions, nor formulate your opinions from them. The charts tell the story.

We have what looks like a low forming this weekend. Note the shape of the market. This low is a lower low. Since it is a lower low, it does not signify a buying time for stocks. The lower low indicates the market should retrace to the upside, and form a lower high. Doing this will confirm we are now in a bear market, at least temporarily. This is called identifying the trend. It is the first thing that should be done in attempting to identify the future direction of the market. Time is important also of course, and identifying the trend on daily, weekly or monthly charts, helps determine how much further out in time we can attempt to forecast. Monthly charts give the strongest data, but of course by the time a monthly chart gives its signal, the trend is already often underway.

By the time the papers have recognised the trend, it is probably just about all over, and the market is preparing to change trend the other way. So don't believe what the papers say. As I have shown in classes.

A lower low is now in place, having broken the eclipse low of 2905 on August 11th. This is significant.

The more important low this year formed on May 28 at 2848. If this breaks, it confirms the double top at 3165 and 3163. If 2848 breaks, we are likely to see heavy selling. If heavy selling occurs, we can calculate a target price of 2531: being (2848-(3165 - 2848) )=2531. (2848 would break on expectation of significant news.)

If 2848 breaks, the market is highly likely to reach 2531 as our bear market low. I would expect this 2531 some time in February 2000. I shall update further on this if 2848 breaks. Please note 2848 has to break first, before 2531 comes into play. Stock markets do not rise when interest rates are going up. Note too all the good news coming out about the economy. The market priced in this expectation 6 months ago. It is old news now. Watch interest rates. I believe we are seeing higher rates being priced in, and hence a (slight) economic downturn in the new year. I have been finding it tough to find value in the market of late. The only shares running at present are technology, biotech and specs. This should be telling you something. The bear is growling backstage. Markets have a habit of pricing in bad news well before it becomes obvious in the economy around us.

ps, I hope you like our bliss index and economic barometer. EIS is developing our land value index next which hopefully will give us better clues on even more effective business cycle timing.