DJ -0.3%, SP500 -0.3%, NYA -0.27%, Nasdaq -0.63%, Russell2000 -1.44%. Financials were hit hard, -2.38%
Two ends of the spectrum, Dow Jones and R2K are now below the 20-Day SMA. The others will probably follow.
MFI is now below its mid-line. Other indicators are still holding up. SP500 in a sideways consolidation. This can still go either way.
DBC flat -0.06%. Industrial Metals -2.27%. Energy flat -0.07%. Gold +1.4%
Yesterday, it seems Australia pre-empted the falls in America. We should be down again today. Which means that the 20-Day MA will be broken to the down side. Watch 5700 – key level.
America closed last night for MLK Day. In Europe Miners tended to be higher on the rise in IO reported last night (>7%), but broad indices were down, Euro STOXX 600 down -0.8%.
Last night I warned: The chart is nicely set-up (dual support) for a bounce off the 20-Day MA. A break back below that, and the uptrend is in doubt.
The 20-Day MA (smoothed) is at 5700.
The Australian market this morning after the first half hour is down -45 points and is at 5703. Watch.
Here’s today’s chart for the XJO:
Today’s action was an “inside” day – that suggests that today’s action was “lack-lustre”.
An inside day indicates a lack of commitment. Today was positive but not especially so. With a huge price rise in the Iron Ore Price (>7% in China) – one would expect a more enthusiastic response.
But – we live in a complex, tangled world. It is far from being one dimensional. Despite what the media would have us believe, one day’s movement in an index is just that – one day’s movement in an index – it doesn’t prove anything. The media, however, love to say that the movement in the index was caused by XYZ. That’s all retrospective and conjecture.
Chartists are left with their charts.
What are the charts saying now? That depends on who you are talking to. Chartists are anything but an agreeable mob.
But my view (for what it’s worth) we are stalled at support. A move lower and we’ll probably see more downside. A bounce – and we’re probably going on to new highs.
Anyone want to make a prediction on a Trump-Inauguration Bounce? Be my guest.
The chart is nicely set-up (dual support) for a bounce off the 20-Day MA. A break back below that, and the uptrend is in doubt.
Watch out if we get a break below dual support.
Nothing much happened in the SP500 last night. A narrow range day on low volume. That’s sometimes a danger signal. But this can break either way.
The long-term Stochastic (50,10,10) is very over bought and has been so since late November. The Bollinger Bands on that indicator are about as tight as they can be.
This index is looking at a big move some time in the near future. When? Your guess is as good as mine. Which way? The divergence on the MFI says down. But that just tilts the probabilities a little that way – it is not conclusive – watch for a definitive move in the Index.
In Australia yesterday:
The ASX200 had a big fall yesterday, down -0.79%. This could be a healthy pull-back. The Index is now down to a minor support level. Below that is the 20-Day MA and the Super Trend Line more or less in sync.
Below that is the break-out level of 5587. A successful test of that should see our market go on to new highs.
Of course, anything can happen. A lot of media pundits are predicting a big pull-back and more volatility with Trump’s inauguration coming up. When so many are making a call like that – they’re usually wrong.
It’s our job to ignore the media and watch the charts. That’s what we’ll be doing.
Beware of Black Cats and Ladders today.
The American market generally is in a sideways consolidation. The exception in the major indices is the Nasdaq – in an up trend.
Last night, the American indices recovered most of early losses. DJ Industrial -0.32%, SP500 -0.21%. Nasdaq -0.29%. New York Composite -0.2%. Russell 2000 -0.89%. DJ Transport +0.49.
NYSE NewHigh/NewLow Ratio is bullish at 82.3%. NLs just 17.
SP500 remains above the 20-day MA, but momentum has dropped off. This is particularly evident in MFI, which is showing a negative divergence. This could go either way, but the odds are tilting a little to the downside.
DBC +1.47%. Energy +1.43%. Industrial Metals +2.38%. Gold +0.36%.
Those figures will support our miners and energy stocks today. Others might struggle. Materials has been the strength in our market, so we might see mildly positive results today.
This is my first report since late November. So – first – all the best for 2017.
I’ve been away for many weeks overseas. During that time I’ve kept away from news of the stock market – often by no choice of my own – I simply had no access to the internet.
Sometimes that’s a blessing. This time – it was. The Trump Rally from early November has continued on – although weakening in the US, not in Australia. The rally in Australia may be coming to an end.
Here’s a chart for the ASX200 as at close today:
XJO is at resistance and very overbought.
Bollinger Bands on the Indicators have tightened up – so a big move is coming. Clearly, given the size of this rally, the next major move will be to the downside.
On a couple of Indicators, they have already pushed lower. This is all relative. Given the tightness of the bands, it doesn’t take much to push into negative areas.
What’s next? Anything can happen, but the odds on further up side are clearly in favour of the bears.
The only questions are: Will this be a sideways consolidation? Or, a considered pull-back of 5% or so.
I think the odds are on a pull-back. Maybe not immediately. We could see both scenarios – a sideways consolidation followed by a pull back.
That’s the most likely event.
In the longer term, I’ve been conceptualising a few ideas while I’ve been away. I’ve got a great deal of grunt work getting data on those ideas. But, hopefully, they will allow some further clarity when peering into the pea soup of the markets. More on that later in the next couple of weeks.
This is my last post for this year. I’ll be overseas for a few weeks in a country where internet connections are, at best, poor, and in some areas non-existent. So I’ll take this opportunity to wish all my readers the best for the Festive Season and 2017.
Due to limitations of time, this week’s report deviates from my usual practice. I hope you still find it of use.
- Australian Market: Weekly Performance
- Australian Market. XJO – Monthly, Weekly, Daily Charts.
- Australian Market – Risk
- Australian Market, Metals and Mining (XMM)
- Australian Market, Bell Wether Stock – CBA
- America – SP500.
- America – Small Caps
- Summing up.
AUSTRALIAN MARKET: SECTOR PERFORMANCES IN THE PAST WEEK.
XAO up +2.63%. That’s a modest fall in one week.
Only one sector was down. Health -0.28%. Composite Bonds ETF (IAF) was also down -0.14%. Everything else was up >1.7%
Materials once again was the best performer +5.71%. Energy was also very good +5.38%. Given this risk-on environment, it was a surprise to see Utilities do so well, +4.51%
XJO, Monthly, Weekly, Daily Charts.
There are only three more trading days left in November. So far this month XJO is up +3.57%.
Currently, the Monthly Index is above the 3, 10 & 20 Period Moving Averages. That’s a bullish scenario.
XJO up this week +2.77%. The Index is in the middle of its up-trend channel. All indicators are above their mid-lines. Again, this is a bullish set-up.
Indicators are high, but not especially so. RSI is below its overbought level.
CCI has started to roll over, suggesting that momentum is slowing.
Short Term Stochastic is overbought. It can stay that way for days. A cross by the Short Term Stochastic below the Long Term Stochastic would indicate that a pull-back has started. That could happen in the next week.
Australian Market – Risk
Bonds/Stocks Ratio provides information about the Risk that traders are taking on. From the middle of October till the American election, this Ratio was rising indicating that traders were defensive. Once the result of the American election became obvious, this Ratio reversed in the blink of an eye and is still falling. It can, of course, reverse to the upside just as quickly, but it usually does some t0-ing and fro-ing before doing so. That might indicate a sideways trend or maybe a little downside. That now seems likely given the strength we’ve seen over the past three weeks.
Australian Market – Metals and Mining
The main driving force behind the Australian market in recent weeks has been strength in the Miners.
The first leading sign of a weakening in a Stock or Index Chart often comes with a negative divergence in the CCI. We’re now beginning to see that occur. There are no guarantees, but this suggests we’ll see some downside in the near future in the Miners and probably the broader market.
AUSTRALIAN MARKET, BELL WETHER STOCK – CBA
CBA is the largest stock by capitalisation in the Australian market. As such it has a significant impact on our market.
Since early this year, CBA has been in a broad trading range. On Thursday intra-day, the stock once again hit the upper horizontal line of that trading band. It then retreated to finish flat on the day. On Friday, it fell again, -0.33%.
On Thursday, RSI for CBA finished above 70, i.e., the overbought level, and it has since retreated. More downside seems likely. If it pulls back for a couple of weeks, that might set-up a scenario for a strong Santa Rally. Watch.
America – SP500
The Short Term Stochastic is now at 99.5. The maximum is 100. It is rare to see the ST Stochastic at such a high level.
The Long Term Stochastic is now at 92.9. So both measures are now overbought. It wouldn’t take much for the ST Stochastic to cross below the LT Stochastic and indicate the start of a pull-back.
CCI is flat and showing a negative divergence from the Index. That’s another indication that momentum has slowed. It wouldn’t take much to turn this Index to the downside.
AMERICA – SMALL CAPS.
The Small Caps Index (Russell2000) has been up 15 Days in a row. The last time that happened was in 1996. RSI is at an extreme level 79.91. (Dow Jones Transport Index is showing an even higher RSI at 85.47.) Such readings often come at the beginning of a strong bull market. But, in the short term, suggest irrational greed on the part of investors. Expect a pull-back.
The American market, by any measure, is showing exceptional strength. VIX is low suggesting complacency. Australian VIX is even lower than the American VIX.
The Australian market, although strong, is not showing the same degree of strength as the American market. But CBA became overbought on Thursday and pulled back. Mining has been the driving force behind the rise in the Australian Market. RSI for the XMM (Metals and Mining) became overbought on 11 November. Since then XMM has risen again but RSI hasn’t followed – now showing a negative divergence. Both CBA and XMM are showing negative divergences on the CCI.
Records can always be broken. But by any measure the American market is showing irrational degrees of greed. A pull-back is now a very high probability.
Australia is likely to follow.
The strength in the American market is usually seen at the start of bull markets. If we do get a pull-back, that should set up a strong Santa Rally.