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Australia's Dysfunctional Politics and its Stock Market
What the return of Australia's once and future Prime Minister portends for the ASX All Ordinaries

By Nathaniel Williams
Fri, 19 Jul 2013 17:15:00 ET
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If you think U.S. politics are dysfunctional, consider this political story: After Prime Minister Julia Gillard recently saw her approval ratings fall to all-time lows for a sitting prime minister, fellow Labor Party member Kevin Rudd last month usurped her leadership of the party -- effectively stealing her role as Australian prime minister. It was a de facto coup. 

If this backroom backstabbing sounds familiar, it's because it happened before -- with the same players -- just three years ago. In May 2010, Rudd was prime minister. His approval ratings fell to all-time lows, and Gillard challenged him for Labor Party leadership. She swiftly deposed Rudd in June 2010 to become prime minister.

This tale of two depositions is fascinating. But it is important less for its political intrigue -- and more for what it says about Australia's stock market.

You see, back on July 1, 2010, EWI's Asian-Pacific Financial Forecast explained to readers how Gillard's initial dramatic overthrow supported the Elliott wave analysis of Australia's ASX All Ordinaries. Editor Mark Galasiewski told readers that the Elliott wave count -- confirmed by the dramatic social event -- implied that Australian stocks were "approaching a significant low."

The Asian-Pacific Financial Forecast's analysis didn't suggest that the deposition itself would cause a stock market reversal. Rather, the social mood extreme behind the dramatic event corresponded to the extreme readings of social mood in the stock market -- and both suggested a trend change.

The ASX All Ordinaries. Modified from the July 2013 Asian-Pacific Financial Forecast

The Asian-Pacific Financial Forecast was spot-on: Australia's ASX All Ordinaries bottomed just two days later -- and surged 18% in subsequent months, as you can see in the chart above.

Here's why this matters for you now: The July 2013 issue of The Asian-Pacific Financial Forecast gives you the inside scoop about Gillard's latest ouster. You will understand social mood's implications for the trend in Australia right now -- and whether you should expect a similar outcome in Australian stocks. 

Get this critical perspective -- along with the same kind of Elliott-based market analysis for every major Asian Pacific market -- via EWI's comprehensive Asian-Pacific Financial Forecast service, risk-free. Learn more>>

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