FSU Editorial: "McHugh�s London FTSE, German DAX, and Australia Report" by Robert McHugh 10/12/2007

MCHUGH'S LONDON FTSE, GERMAN DAX,
AND AUSTRALIA REPORT
by Robert McHugh, Ph.D.
October 12, 2007

The London FTSE, German DAX, and Australia's SPASX200 are all approaching a top. The FTSE looks to be finishing a wave b-up inside a wave a-down, b-up, c-down for a correction of the recent multiyear Bull market. It is completing a Rising Bearish Wedged for wave b-up. Prices have exceeded the upper Bolling Band, two standard deviations above its 20 day moving average. It has also reached the 10 day average of each day�s highs. These are normally places where tops occur. The same is true of the German DAX.

For the Australia SPASX200, on a long-term basis, Intermediate degree wave 1 up of primary (5) up likely completed in July. Massive international liquidity infusions by central banks have floated markets higher, where inflation is being used as a tool by central banks to ward off declines in the stock market. A huge Bull market phase will continue after the current Intermediate wave 2 correction finishes. The alternate labeling is that Intermediate 2 down completed in August and a huge Bull market, Intermediate wave 3 up has started. Arguing for the Bullish scenario is that the weekly MACD is close to generating a new �buy� signal, once the blue histograms go decisively positive. Arguing against it is a Bearish divergence with the London FTSE and the German DAX, which have failed to reach new highs.

Short-term, waves a -down, b -up, and c -down of Minor degree wave a -down are complete. Wave b -up is now very close to completion, with wave c -up nearly complete within an a -up, b -down, c -up for b -up. Intermediate 2 -down is an a -down, b -up, c -down flat, so you can see we have further to go on the downside once the corrective rally finishes, and that this next decline, wave c , should last several weeks. Wave c -down will be a five wave decline. There is an alternate possibility that the wave 2 down correction completed at the August bottom, and the first rally leg of Intermediate wave 3 up has started and is approaching completion. That suggests the coming decline will be Minor degree wave 2 down.

It is possible that the waves are all one degree smaller than we have charted, which if that is the case, means a protracted decline is underway, lasting into mid-2008. If our degree of waves charted is correct, then Intermediate wave 2 down could wrap up by November, 2007.

�Jesus said to them, �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

Contact Information
Robert McHugh, Ph.D.
Main Line Investors, Inc.
TechnicalIndicatorIndex.com
Kimberton, PA USA
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