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.
The up-trend continues. DJ Industrial +0.36%, SP500 +0.39%. Nasdaq +0.34%. New York Composite +0.39%. Russell 2000 +0.38%. DJ Transport +0.49. Russell2000 is very overbought and now a smidgin under the extreme level. Dow Jones is very overbought. SP500 is overbought. And DJ Transport is showing an almost unbelievably high RSI of 85.5. This up-trend can’t last much longer.
NYSE NewHigh/NewLow Ratio is bullish at 94%. NLs just 14.
SP500 has moved above horizontal resistance. Short Term Stochastic is overbought. RSI is overbought. MFI is now over 90. We rarely see readings that high on a major index. MFI is a leading indicator, so we may need to see a negative divergence before we see a pull-back.
DBC down, -0.73%. Energy -2.61%. Industrial Metals +2.81%. Gold -0.57%.
DBC is struggling at resistance, held back largely by poor Energy prices and a continuing slump in Precious Metals.
I won’t be writing a full Weekly Report tomorrow. I’m leaving for overseas on Monday and have family commitments on Sunday. There will, however, be a shorter Weekly Report tomorrow.
Market closed for Thanksgiving. Friday’s NYSE has a shortened trading day.
German DAX: +0.25%, French CAC +0.29%, London FTSE +0.17%. European ESTOXX +0.25%. The European Index has been in a sideways trend for nearly four months.
AUSTRALIAN SHARES IN LONDON: Domino’s Pizza +3.2%. BHP -0.1%. Rio +0.1%.
Commodities: Iron Ore +2.7%. Copper +2.3%. Oil Brent -0.2%.
Nothing much will happen on our market today with America closed and taking into consideration other factors above. Plus it is OpEx Day today.
XJO finished flat today +0.01%. Volume was above average. This sort of scenario is not unusual coming into OpEx Day – which occurs tomorrow.
Today’s narrow range was, of course, assisted by small changes in overseas indices last night.
Looking at today’s action and overseas action last night, suggests we’ll see little movement in our market tomorrow.
Next week? Anybody’s guess. But we are nudging up into levels where a downside move could occur. If we go higher, then a downside move sometime next week is likely.
Here’s the biggest threat to the Australian market:
CBA is the largest stock by capitalisation on the Ozzie market. It has now reached overhead resistance. RSI is overbought at 70.1. Much more upside in CBA seems unlikely. A move down by CBA is more likely. And that will likely affect our whole market.
The up-trend continues, Nasdaq down a little. DJ +0.31%, SP500 +0.08%. Nasdaq -0.11%. New York Composite +0.15%. Russell 2000 +0.58%. Russell2000 is very overbought and now just under the extreme level. Dow Jones is overbought and just under the very overbought level. Other indices are approaching overbought levels.
NYSE NewHigh/NewLow Ratio is bullish at 86.9%. NLs were at 40. With bond prices falling, Income issues were again the culprit for the rise in NLs.
SP500 has moved above horizontal resistance. Short Term Stochastic is overbought. MFI is now over 80. Once it gets above 80, a pull-back becomes a high probability. This is a leading indicator, so we may need to see a negative divergence before we see a pull-back.
DBC up, +0.4%. Energy +0.81%. Industrial Metals +2.42%. Copper +2.3%. Iron ore +1.5%. Gold -1.98%.
Last night I suggested we’d be flat or down a little. Despite the good Metals and Energy prices, I can’t see reason for changing that. Tomorrow is OpEx Day, so we might have a quiet couple of days.
XJO up strongly again today, +1.31%. Volume was still below average (about 91% of the 20-Day Average). Strong up move on low volume – sounds a bit sus to me. Sellers holding off?
Short-Term Stochastic is overbought – but nothing else is showing significant danger. Indicators are creeping up – but nothing to get too worried about.
Here’s my Z-Score chart for the Ozzie market:
It’s getting up towards the overbought level of 2, but not there yet.
This tends to be a leading indicator.
So, although the market has been exceptionally strong the past two days, we could see more upside.
But – maybe not tomorrow. The XJO chart is hard up against horizontal resistance. Expect a pause, or maybe a little downside before the Index takes off again for a final thrust to the upside.
The up-trend continues. DJ +0.35%, SP500 +0.22%. Nasdaq +0.33%. New York Composite +0.26%. Russell 2000 +0.92%. Russell2000 is now very overbought. Dow Jones is overbought. Other indices are approaching overbought levels.
NYSE NewHigh/NewLow Ratio is bullish at 93.4%. NLs were at 19. Bond yields were down (prices of income issues rose) which took most of the income issues out of the new low figures.
SP500 has moved above horizontal resistance. Short Term Stochastic is overbought. MFI is holding above the top of its Bollinger Bands. MFI is now 80. Once it gets above 80, a pull-back becomes a high probability.
DBC down a little, -0.13%. Energy -0.4%. Industrial Metals +1.39%. Copper +1%. Iron ore +5.7%. Gold -0.3%.
We should have a good day today.