SUMMARY DAILY STATISTICS FOR FRIDAY FEBRUARY 6th, Closing Price Demand Supply Purchasing Date SP ASX 200 Power Pressure Power Indicator

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1 ROBERT D. MCHUGH, JR., Ph.D. Australia Weekend Market Analysis A Publication of Main Line Investors, Inc. P.O. Box 1026 Issue No Address: Kimberton, PA Friday February 6th, 2009 rmchugh@technicalindicatorindex.com SUMMARY DAILY STATISTICS FOR FRIDAY FEBRUARY 6th, 2009 Australia SP ASX 200 Closing Price Demand Supply Purchasing Date SP ASX 200 Power Pressure Power Indicator Jan 30 3, Up 1 to 367 Flat 0 at 387 Flat 0 at 85 Feb 2 3, Down 3 to 364 Up 2 to 389 Down 1 to 86 Feb 3 3, Down 1 to 363 Up 4 to 393 Flat 0 at -86 Feb 4 3, Down 5 to 358 Up 8 to 401 Down 4 to 90 Feb 5 3, Down 2 to 356 Up 5 to 406 Down 1 to - 91 Feb 6 3, Up 3 to 359 Down 3 to 403 Up 1 to 90 Summary of McHugh s Proprietary SP ASX 200 Buy/Sell Signals Fullest Extent of Index Term Signal Date Last Given Index Move Since Signal Purchasing Power Indicator SP ASX 200 Short Sell February 5th, 2009 Fell 0 Points ( 0.0 %) 30 Day Stochastic SP ASX 200 Short Sell January 15th, 2008 Fell 187 Points ( 5.3 %) 10 Day Average Short-term Advance/Decline Crossover Signals Feb 6th Fullest Extent of Index A/D Indicator Signal Date of Signal Index Move Since Signal SP ASX Sell January 15th, 2008 Fell 187 Points ( 5.3 %) The Australia SPASX 200 rose points, or 1.20 percent, to 3, Friday February 6th. Volume was down at 88 percent of its 10 day average. Upside volume was 73 percent, with advancing issues at 61 percent, with upside points leading at 63 percent. Demand Power rose 3 points to 359, while Supply Pressure fell 3 points to 403, telling us Friday s advance was mild, but solid. Demand Power crossed decisively below Supply Pressure Thursday, January 15th, triggering an enter short positions signal, and remains there Friday. Our key trend-finder indicators (other than DP/SP) remain on a sell signal Friday. The Purchasing Power Indicator rose 1 point to negative 89.62, remaining on a sell signal from February 5th. The 30 day Stochastic Fast remained at 7.64, below the Slow at 8.42, remaining on a sell signal from January 15th. The Fast had to cross more than 10 points below the Slow for a new sell signal. The FTSE, DAX, and SPASX200 recently completed the first phase of a three phase Bear Market a plunge. A multi-month sideways pattern or rally is underway. It will divide two major plunges so raising cash during this rally phase will be wise. Visit Our Website At Page 1

2 NDX MCHUGH S FINANCIAL MARKETS FORECAST & ANALYSIS Issue No SPASX200 vs: Demand Power & Supply Pressure October 2008 to February 2009 When Demand Power Crosses above the Supply Pressure Line by 10 points, we get a Buy Signal. When Supply Pressure rises above Demand Power by 10 points, we get a Sell Signal. Exit Signals occur when DP or SP lines return to intersecttion after an entry signal. SPASX200 We received a Enter Short Positions Signal January 15th, 2009 Demand Power/ Supply Pressure Enter Short Supply Pressure Enter Short copyright 2009 Robert McHugh, Ph.D. Demand Power Enter Long 10/6/08 11/6/08 12/6/08 1/6/09 2/6/ Status of Demand Power/Supply Pressure Key Trend-finder Indicator First Current Current Fullest Extent of Index Term * Signal Date of Signal Demand Pr. Supply Pr. Index Move Since Signal SPASX200 Short Enter Short 1/15/ Fell 187 Points ( 5.3 %) * We consider a new entry point for a signal the day when one measure crosses more than 10 points above the The 10 day average Advance/Decline Line Indicator remained at negative 26.1 Friday, remaining on a sell signal from January 15th, when it fell below the negative threshold for a new sell. We ve been measuring and reporting Demand Power and Supply Pressure for the Australia SPASX200 index for the past year. Again, this week we present them graphically, and highlight the SPASX200 Demand Power/Supply Pressure buy and sell, entry and exit signal system, shown on the above chart. Aside from the astonishing correlation, the most exciting aspect about this system is the guidance it provides on exiting an established position. Trading these signals with the primary trend will likely produce greater returns than trading these signals against the primary trend. The theory of this amazing indicator is as follows: What is Demand Power and Supply Pressure? They are our proprietary measures of buying interest and selling interest. They are the raw Page 6 of 6 components of our highly correlative Purchasing Power Indicator. Like most of our key trend-finder Page 2

3 indicators, MCHUGH S they are FINANCIAL momentum MARKETS measures. FORECAST We believe & the ANALYSIS best tool to find a trend of 2 percent Issue No. or 7 more is by following momentum measures. By breaking down the Purchasing Power Indicator into its two key components, we end up with a trading system that identifies 1) when we can enter on the long side (buy the market, with either cash market purchases, futures, or call options), 2) when we should exit that long position, 3) when we can enter on the short side (play the market to decline with an inverse fund, or futures, or put options), and 4) when it would be wise to close that short position. There are never guarantees in this business, however, a look at the above chart, and the chart from two years ago at the top of the next page shows that our odds are pretty good with this system. One thing we really like about this trading system is that it will very rarely leave us holding a short position when we shouldn t. A lot of money has been lost on the short side over the past year due to increasing liquidity and market intervention, taking advantage of shorts, causing surprise rallies, or sustaining rallies indefinitely. By focusing on buying interest and selling interest momentum, we can know that even though an Elliott Wave labeling is calling for a top, one may not be coming quite yet if Demand Power is dominating Supply Pressure, guiding us to hold off from going short too soon. So how do we use this market timing trading system? It is simple. The blue line represents Demand Power. The red line represents Supply Pressure. Simply, whenever the Blue line crosses above the red line, the odds are very high that a rising trend is starting. So we enter a long position on the date the Blue crosses over the red line. If we want to be conservative, we can wait for a decisive crossing before taking a position. Maybe that would be where Demand Power rises more than 10 points above the Supply Pressure reading. Remember, we present these measures every night as part of our daily market updates, and include them on page 2 of each report. Once the Blue line rises above the red line, we hold our long position. We can always exit at any time, especially if we have a profit we are satisfied with. However if we want to try and get the maximum out of a move, we can hold that position until the blue line drops down and intersects the red line again. That would be the latest time we would close the long position. Most of the time, the trend has not reversed when these two lines intersect, or if it has reversed, only a small portion of the reversal has taken place. Sometimes the intersection does not mean a new reversal of trend, but merely means a sideways move is coming, thus if we are holding options (where sideways moves are death), we can get out before too much time decay steals from a paper profit. Should the red line (supply pressure) rise decisively above the blue line, we would consider that an entry signal to take a short position, if so inclined. We could buy put options at that point. We would then hold that position until the red line returns to intersect again with the Blue (Demand Power), at which time we want to get out of our short position if we haven t taken a profit and gotten out by then. Another interesting dynamic of this market-timing trading system is that if the Demand Power line (Blue) is above the Supply Pressure line (red), its measure can actually be dropping, yet the rising trend it forecast will continue. The trend usually stops when the two lines intersect, and is not correlative to whether Demand Power or Supply pressure is rising or falling, per se. In other words, once Demand Power rises above Supply Pressure, even if the margin is shrinking, the trend will still likely rise. Conversely, once Supply Pressure is above Demand Power, even if it starts declining, the trend will likely remain down until the two lines intersect. Page Not always, 6 of 6 but most of the time. Page 3

4 MCHUGH S FINANCIAL MARKETS FORECAST & ANALYSIS Issue No. 7 Why? Because if Supply Pressure and Demand Power are both declining, however Supply Pressure is dropping more than Demand Power is falling, then prices will float higher. Same on the reverse. If Supply Pressure is falling, but Demand Power is falling more steeply, prices will decline. It is virtually impossible to catch a trend s life expectancy without a detailed analysis of Demand Power and Supply Pressure. We provide this information. We have a formula that considers each day s data, and convert that to DP and SP measures. We consider price in these calculations, but as or more importantly, we also consider other data, and the momentum change of that data. In combination, these determine Demand and Supply on any given day. We present this chart on a regular basis in our newsletters, and hope you find your market timing trading and investing strategies more profitable than ever because of these indicators. Again, as stated many times in the past, any body of technical work we present, which is not one of our key trend-finder indicators, is simply background. We do not trade off cycles, analogs, Elliott Wave analysis, patterns, moving averages, or Dow Theory. We trade off our momentum key trendfinder indicators of demand and supply (the Demand Power/Supply Pressure, and Purchasing Power Indicators), and off of breadth momentum (the 30 day and 14 day Stochastic indicators, and the Advance/Decline Line indicators). London s FTSE 5, 5 of (5) of V of (V) {III} The Weeky MACD is on a buy signal. v, 3 Weekly Bar Chart 1 i ii iii iv 4 2 (4) (A) (C ), {IV} The Weekly Full Stochastics are on a Buy Signal. Page 4

5 Left Shlder Head Right Shlder (A) (C ), {IV} Minimum Downside Target of 4,300ish Has Been Reached. The Weekly Full Stochastics on a buy signal. The FTSE is Correcting its Wave (A) plunge. The Daily MACD is on a buy signal. B A London s FTSE This could be a Rising Bearish Wedge forming for wave, warning wave (C ) down is coming. C, (A) The Daily Full Stochastics are on a buy signal But topping. Page 5

6 Germany s DAX 5, 5, of (5) of V of (V), {IV} The Weekly MACD is on a buy signal Bottoming. Weekly Bar Chart 1 2 i ii iii iv v, 3 4 (A) (C ), {IV} (4) The Weeky Full Stochastics are on a buy signal. The Daily MACD is on a buy signal. V of (V), {III} B 4 Germany s DAX A The SPASX200 is in wave up. The Daily Full Stochastics on a buy signal, But topping. C, (A) Possible Sideways Triangle for wave, which if occurring, means we have seen the highs for a long time, maybe years. Page 6

7 The Monthly Full Stochastics are near a bottom, suggesting, a rally that will last several months has started. Monthly Chart The Monthly Full Stochastics are near a bottom, suggesting, a rally that will last several months has started. Monthly Chart Page 7

8 SP/ASX Fast Australia SP/ASX Day Stochastic Buy/Sell Indicator A Short-term Measure of Momentum Changes Comparing the Percent of SP/ASX 200 Stocks Above Their 30 Day MA With a Slower 9 Day MA of Same Slow For February 6th, 2009: Fast 7.64 Slow 8.42 SP/ASX 200 Overbought > 80% Sell Signal Buy Signal A Sell Signal Was Generated on January 15th, 2008 Oversold < 15% 10/6/08 11/6/08 12/6/08 1/6/09 2/6/09 Stoch % Fast/Slow % % % % % % 80.00% 60.00% 40.00% 20.00% 0.00% SP ASX 200 Purchasing Power Indicator ASX 200 PPI is a Short-term Momentum Measure of Purchasing Power, Generating Buy and Sell PPI Signals When Changes Suggest Sustainable Multi-week Moves are Likely. ASX 200 Sell Signal Buy Signal February 6th, 2009's ASX 200 PPI is A Sell Signal Was Registered on 2/5/ copyright 2008 Robert D. McHugh, Jr., Ph.D /6/08 11/6/08 12/6/08 1/6/09 2/6/09 PPI Page 8

9 ASX 200 Price SPASX Day Moving Average Advance/Decline Line vs. the SPASX200 Decisive Cross-overs Above the Zero Line Usually are Signals of the Start of a Multiweek Rising Trend. Cross-unders Below the Zero Line Signal the Start of Declining Trends. SP ASX 200 A/D copyright 2009 Robert McHugh, Ph.D. February 6th, 2009's 10 day A/D is Negative on "sell" from January 15th, 2008 A Decisive Crossing Would Move to +/ /6/08 11/6/08 12/6/08 1/6/09 2/6/09 ASX200 A/D Monthly Chart The Monthly Full Stochastics are near a bottom, on a buy signal, suggesting, a rally that will last several months has started. Page 9

10 Weekly Chart The Weekly MACD is on a buy. The Weekly Full Stochastic is on a sell signal, but bottoming. Australia 5, 5 of (5) of V of (V), {III} The Weekly MACD is on a buy signal. v, 3 Weekly Bar Chart 1 2 i ii iii iv 4 (4) The Weekly Full Stochastic on a sell Signal. (A) (C ), {IV} Page 10

11 V of (V), {III} The Daily MACD is on a buy signal. B 4 A The SPASX200 starts wave up. C, (A) The Daily Full Stochastics on a sell signal. The London FTSE, the German DAX, and the Australia SPASX200 have completed their first phase of the Bear Market, a plunge. This plunge was the bottom of the first phase of the Bear Market, wave (A)-down. They have all now started wave up. This move should last several months, into at least the first quarter of The Monthly Full Stochastics are bottoming. Given the sell signals in reliable long-term indicators such as Dow Theory and our own proprietary Primary Trend Indicator in U.S. Markets, we believe the 2007/2008 decline was Supercycle degree wave (A) down of an evolving (A)-down, -up, (C )-down move for Grand Supercycle degree wave {IV} down. This means a correction, either a sideways triangle or a larger rally, a zig-zag for wave -up has started, one that lasts several months. But, the bad news is that means a catastrophic wave (C ) down will follow in 2009, perhaps into If the degree of waves is one smaller than we are suggesting here, it means the Bear Market could last into These indices are in wave up, which is a messy stairstep rise, a pause. Short-term, Daily Full Stochastics are on a sell signal, but the weekly is bottoming. Any short-term decline should be reversed with a multi-week rally to follow. This recent short-term decline has not reached new lows below the November lows, should not, and is a normal correction within an intermediate term rising trend, but within a larger primary degree Bear Market. Page 6 of 6 Page 11

12 B A The SPASX200 starts wave up. C, (A) The Daily Full Stochastics on a sell signal. For I know the plans I have for you," declares the LORD, "plans to prosper you and not to harm you, plans to give you hope and a future. Jeremiah 29:11 President s Day Specials: 6 Months for $175, or 9 Months for $200, or 10 Months for $229, or, 12 Months for $325, or 13 Months for $249, or 18 Months for $369, or * 24 Months for $449 * Good through Sunday, February 8th, 2008 Simply go to Page 6 of 6 and click on the Subscribe Today or Renew Today buttons. Page 12

13 MCHUGH S FINANCIAL MARKETS FORECAST & ANALYSIS Issue No. 7 Bottom Line: The SPASX200 key trend-finder indicators are on a sell signal. Conservative Balanced Portfolio Recent Transactions As of Friday February 6th, 2009 * On 2/6/09 we closed all HUI positions in the Market Timing segment allocation of our conservative portfolio by selling 400 shares of GDX at $35.42 per share. * On 2/6/09, we closed all Gold positions in the Market Timing segment allocation of our conservative portfolio by selling 100 shares of GLD at $89.59 per share. * On 2/6/09, we closed all Silver positions in the Market Timing segment allocation of our conservative portfolio by selling 1,000 shares of SLV at $12.91 per share. Note: The above transactions raised $36,037. We plan to buy these securities back after the Full Stochastics drop to oversold levels, however are holding similar securities in our buy and hold segment of the portfolio given the long term bullish trend that is underway. Note: Our Conservative Portfolio Model substantially outperformed the S&P 500 in Check it out! Click on the Conservative Portfolio button at the left side of the home page. We posted an updated Balances/Market Value Portfolio as of December 31st, 2008, available in the Conservative Portfolio section. Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at The statements, opinions, buy and sell signals, and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates, buy and sell signals, and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. The information contained in the newsletter is expressed in good faith, but its accuracy is not guaranteed. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Copyright 2009, Main Line Investors, Inc. All Rights Reserved. If you are enjoying your subscription, Page 6 of 6 please tell a friend. Let them know about our free one time 30 day trial subscription. Page 13

14 MCHUGH S FINANCIAL MARKETS FORECAST & ANALYSIS Issue No. 7 Bonds Jesus and said Interest to them, Rates: I am the bread of life; he who comes to Me shall not hunger, and he who believes in Me shall never thirst. For I have come down from heaven, For this is the will of My Father, that everyone who beholds the Son and believes in Him, may have eternal life; and I Myself will raise him up on the last day. John 6: 35, 38, 40 If you are enjoying your subscription, please tell a friend. Let them know about our free one time 30 day trial subscription. An Exchange Traded Fund for Australia is symbol EWA President s Day Specials: 6 Months for $175, or 9 Months for $200, or 10 Months for $229, or, 12 Months for $325, or 13 Months for $249, or 18 Months for $369, or * 24 Months for $449 * Good through Sunday, February 8th, 2008 Simply go to and click on the Subscribe Today or Renew Today buttons. Note: The 24 Month Subscription gets you a free copy of the book, Elliott Wave Principle. Simply us your shipping address. Page 6 of 6 Page 14