Dow Jones +1.82%, SP500 +1.83%, Nasdaq +2.46%, New York Composite +1.4%, Russell2000 +1.59%. Those are big numbers, but, with the exception of the Nasdaq, today’s candle remains within the range of the previous day. We need to see a big upside day tomorrow.
New Lows on the NYSE decreased a little from 100 to 82 but still too high for comfort.
Here’s a regular candle stick chart for the SP500:
All Ordinaries Index (XAO) up today +0.05% on well above average volume. This is the third day in a row where volume has been well above average. The battle has really been heating up.
Here’s the XAO chart:
Today’s doji candle is a “dragonfly”. This means that the index fell heavily and then reversed to finish more or less where it started. If this is a reversal indicator (likely), it needs a strong up day to confirm tomorrow.
All sectors saw some sort of reversal today. Two of the weakest were Energy and Consumer Staples.
Energy was down -1.89% today but that figure erased about half the early losses. At its worst, Energy was down -3.83%. Given that Energy on the U.S. stock market was down more than -6% overnight, that’s not a bad result.
Here’s the Consumer Staples chart:
Consumer Staples finished above its mid-point today – that’s a positive. We need to see a solid up day tomorrow.
Woolworths has been a drag on the XSJ. It reported last week and the report was greeted warmly but not ecstatically by the market. Monday and Tuesday, however, seemed to changed that sentiment drastically.
Woodside and Woolies were the worst two performing blue chip stocks today. One is a cyclical and the other is a defensive – for both to get the wooden spoon suggests that something is seriously wrong with the defensive stock.
Dow Jones -2.84%, SP500 -2.96%, Nasdaq -2.94%, New York Composite -2.97%, Russell2000 -2.71%. The American indices also made a decisive move lower.
New Lows on the NYSE increased from 42 to 100. That’s a high number but still a long way below the 1300+ we saw last week. New Lows on the Nasdaq rose from 25 to 64. NYSE Trin rose to 4.97, which is the highest closing value since 2011. So we might be getting close to a selling climax.
Here’s a regular candle stick chart for the SP500:
XJO down -2.12% on heavy volume. Not as heavy as yesterday – but still well above average.
This looks like we’re heading back to test the recent lows. That was a scenario I sketched out a few days ago.
Here’s the XJO Chart:
Here’s the chart for Minerals and Miners:
At the weekend I had some hopes that the XMM might be headed for a medium term up trend. But the past two days have scotched that idea. Until we see the DPO get back above zero, it’s best to leave this to the short term players.
The Financials X-Property is also looking anything but enticing.
The Standard Error Channel suggests we should see a bounce – but until the DPO gets above zero there’s not much point in getting into the Financials.
The Miners and big Financial stocks are the key sectors of our market. While they languish – it’s best to stand aside.
Dow Jones -0.69%, SP500 -0.84%, Nasdaq -1.07%, New York Composite -0.64%, Russell2000 -0.3%. The falls in America were a little more serious and could be the start of another move down. Nothing decisive yet.
New Lows on the NYSE increased from 21 to 42. That’s a long way below the 1300+ we saw a week ago. New Lows on the Nasdaq actually dropped a little from 28 to 25. Russell2000 did much better than the other indices so breadth figures aren’t too bad.
Here’s a regular candle stick chart for the SP500:
XJO down -1.08%. The range today was 2.02%, so the Index finished about mid-range. Volume was very heavy at 134.4% of the 20-Day Average. Monday is usually the lightest volume day of the week, so that increases the significance of today’s heavy volume.
So – we had one helluva battle going on between the bulls and the bears. The bears won on the final count, but they were looking very groggy at the end with bulls showing plenty of fight in the last half hour or so.
Given the very heavy volume today, this looks like a wash-out – except it’s not coming at the low end of a trend. Interesting.
Here’s today’s XJO chart:
Horizontal support held. Oblique resistance held. Between a rock and a hard place.
Indicators have plenty of room to move to the upside. I think we will still see more upside in the near future.
If last week’s low holds – we could have several weeks of upside movement.
- Australian Market: Weekly Performance Chart
- Global Performance: Weekly Chart
- Australian Market. XJO – Monthly Chart
- Australian Market. XJO – Weekly Chart
- Australian Market. XJO – Daily Chart.
- Australian Market, XUJ and XMJ – Daily Charts.
- America – Weekly
- America – Monthly
- Summing up.
AUSTRALIAN MARKET: SECTOR PERFORMANCES IN THE PAST WEEK.
The broad market index for Australia (XAO) after falling heavily on Monday had four strong days to the upside, +0.96%. Seven out of ten S&P Sectors were up.
The worst performing Sector was Telecoms, down -3.74%. That was affected by Telstra going ex-dividend on Tuesday. So it’s not as bad as it looks. Discounting for the dividend, Telstra still finished on the negative side for the week, thus pulling down the Telecom index. Ignoring Info.Tech, which is inconsequential in size, the next worst peformer was XNJ down -0.3%.
The best two performers were XUJ (Utilities) +3.24% and XMJ (Materials) +3.12%.
GLOBAL PERFORMANCE – WEEKLY
Most world indices had remarkable bullish reversals this week. Even the two indices which were negative (China and Japan) had good buying late in the week.
Here, for example, is the weekly chart for Japan (NK225):
This week’s candle is a very long tailed “pin” – which shows that the index fell very heavily and then had a massive rebound. It still finished negative on the week, but the rebound is stunning.
AUSTRALIAN MARKET: MONTHLY CHART – XJO
The XJO this month is down -7.64%. We still have one day to go.
Three of four major indicators are giving bear market signals. The Detrended Price Oscillator is still marginally above zero.
This month’s candle has now fallen down to the horizontal support set by the tops in 2010 and 2011. That’s a major support level. It also is congruent with the Super Trend Line. This month’s candle hit that level and has now bounced strongly. A break below them would be very bearish. Since they have held convincingly it is likely that this pull-back which started in March is now over, at least in the short/medium term.
AUSTRALIAN MARKET: WEEKLY CHART – XJO
The XJO Index is well below the critical support of the 100-Week MA which has provided support on several recent times. Indicators remain bearish.
This week’s candle has a remarkable similarity to the one which occurred early in August, 2011. That was followed by a rebound of a few weeks before the index fell once more. It then took many week’s of basing action before the index was able to resume a bullish posture. That did not occur until well into 2012. Around one year. We may be looking at a similar scenario this time.
In the meantime, swing traders will probably make a killing.
AUSTRALIAN MARKET: DAILY CHART – XJO
The XJO closed the week at 5263.6.
Monday fell heavily then the Index had four strong up days. Thursday and Friday both show indications of intra-day selling. After four up days, and indications of some selling going on, early next week might see a set back for the XJO.
BEST PERFORMING INDICES THIS WEEK: UTILITIES AND MATERIALS
Utlities has been in a long sideways trend since early Feb. 2015. It is the best performing Sector on the Australian market – that position was previously held by Health and Telecoms. There’s no convincing argument at this stage to either buy or sell Utilities (which is dominated by AGL Energy). Short term traders will play the swings.
Materials has been in a secular bear market since April, 2011. It is currently in one of its counter trend rallies. It is now up against a major technical resistance level of the joint 20-Day MA and the Super Trend Line. Given the strong results for Base Metals +2.77% on Friday night in America, the Miners seem likely to push XMJ above that resistance level. That will then be five days up in a row. Some consolidation or a pull back is then likely.
I have a private set of indicators which suggest that Materials are close to a medium term “buy” – but we’re not there yet.
AMERICA – SP500 WEEKLY.
Here’s the Weekly Chart for the SP500:
This week the SPX fell sharply at opening on Monday and then rebounded. This looked suspiciously like the work of the PPT, the Plunge Protection Team, aka The President’s Working Group on Financial Markets. This was created in 1988 by President Reagan after the notorious Black Monday Crash, October, 1987. It consists of: U.S. Treasury Sec. , the Chairperson of the Fed, The chairperson of the SEC, and the Chairperson of the Commodity Futures Trading Commission (CFTC). It was created to stabilise markets in cases of extreme abnormal market action. (See Chuck Butler of the Daily Pfennig on this.) I suspect the PPT might also have been at work on other days during the week.
Anyway – whatever happened, the American market averted a major melt-down this week.
I’ve marked three previous times when the Money Flow Index has fallen below its Lower Bollinger Band – and then returned above that level. In each case the market had several weeks of bullish action. And the long term up trend was maintained.
We may see the same type of action this time.
It may, however, be different this time.
The last two events have occurred in the month of October. The market often rallies from mid-October into year end.
This time, the event has occurred in August. September is notorious for its poor performances. Although up 50% of the time in the past 20 years, the average return has been -0.6%.
Note that in the SP500 chart, the 50-Week MA is close to crossing below the 100-Week MA. If the market rises into that x-over point, and then falls, we’re probably in a bear market. If the x-over occurs, and the SP500 pushes right back up through that level, then the bull market is once again back in action. We’ve probably got a couple of weeks, or perhaps more of upside. Then we’ll see what happens.
AMERICA – SP500 MONTHLY.
One of the most respected stock market research organisations in America is NDR (Ned Davis Research). To mark out long term trends in the American market they use a 3-Month/10-Month X-Over signal.
So far with one day to run in August, the 3/10 x-over has occurred. It is doubtful that one more day will affect the result.
Such x-over signals, by their nature, lag the market but, as you can see in the above chart keep investors in long term bull markets and out of serious bear markets. They don’t pick tops and bottoms – but take a big chunk out of the middle.
In the current market turmoil, world markets have been relatively well correlated. This often happens under bearish conditions. A few weeks ago, the Australian market was poorly correlated with the American market and the major Europeans. It showed a degree of correlation with some of the East Asian markets. That situation has changed in the past 30 Days. Australia now has a significant correlation with the Europeans (UK, France, Germany, Spain, Italy), New Zealand and Canada. It is showing a weak correlation with America and a very weak correlation with Shanghai and Japan.
The Australian market performed well this week, XJO up +0.94% after being down heavily on Monday. That pattern was repeated in most world markets.
The rebound this week has been very strong. I’d expect some more upside in the next couple of weeks or, perhaps a little more.
The big test will come when the American market approaches the point where the 50-Week MA crosses below the 100-Week MA. If America falls at that point – we’re probably looking at a bear market. If America powers up through the x-over point, then the bull market will be resumed.
In the short term I’m reasonably hopeful – but longer term I’ll wait and see how the dynamics play out.