Sunday Smorgasbord. Weekly Report, week ending 26 March, 2017.

March 26, 2017 Comments off

Executive Take-away.  This is a stock picker’s market.  Choose selectively.  Look for winners in the strongest sectors.

CONTENTS

  • XJO Charts, Daily, Weekly, Monthly.
  • Internals – Australian Market.
  • Sector Watch 
    • Sector Momentum
    • Sector Charts
  • Summing Up.

XJO Charts, Daily, Weekly, Monthly

XJO Daily:

XJO DAILY.png

The Daily Chart fell this week to the lower edge of the Standard Error Channel and then rebounded.  That looks bullish.  There is, however, considerable resistance overhead, and considerable support below.  This can go either way.  The odds favour a continuation of the up trend channel, but don’t discount the start of a new down trend channel.

XJO Weekly:

xjo weekly.png

XJO down this week,  -0.79%.

In the short term daily chart, there exists some possibility of further pull-back.  That shouldn’t, however, threaten the long term up trend which could sustain quite a large pull-back and still remain in an up trend.  This up trend started back in early 2016.

XJO could still fall another 4% or so and still be in a long term up trend.

The chart remains above the 13-Week MA.  That’s a positive.  Bulls want to see overhead resistance at 5813 broken to the upside.  XJO currently at 5753.5

XJO Monthly:

xjo myhly.png

The XJO is up +0.72% so far this month.  It is trying to close above the major down trend oblique line from 2007.  We have one more week to go in this month.

We are also coming up to the end of the first quarter of 2017.  We may see some book squaring take place as fund managers try to improve the chance of bonuses going higher.  That might put some upward pressure on stocks and push the XJO into a bullish scenario.

INTERNALS – AUSTRALIAN MARKET.

XJO was down this week.

The number of stocks in the ASX100 above the 200-Day MA remained little changed from the previous week.  The number of stocks above the 200-Day MA came in at 65%, compared to 63% the week before  The Number of stocks positive on the DMX Histogram moved down from 62% to 55%, about the same as two weeks ago.  This is a short term trend indicator and will move more rapidly, week to week, than the long term indicator (stocks above the 200-Day MA).

Both measures remain above the 50% mark – so that remains bullish.

I’d like to see the short term figure (stocks +ve on DMX) higher than the longer term figure (stocks above the 200-Day MA).  That would raise the bullish profile of the Index.

SECTOR WATCH

Sector Momentum

This section compares the performance of each sector against the XJO over a 20-Week period.  It shows relativities not absolutes.

Here’s the previous week’s momentum chart (as at 3 March):

Sector Mom.png

Here’s this week’s Momentum Chart.

Sector Mom.png

Investors took on a slightly more defensive posture this week than the previous week.  The top three momentum sectors are Utilities, Health and Financials X-Property.  Health improved from third place to second place, while XXJ dropped a place.

Three out four of the top sectors are defensive sectors.

Also of note was the drop by XMJ and the rise of XDJ (despite the big fall in Harvery Norman late in the week).

The XJO can continue to rise despite the improvement in the defensive sectors, so long as Financials X-Property (XXJ) continues to perform positively.

 

SECTOR CHARTS (Daily)

XMJ (Materials)

xmj daily.png

XMJ had a poor week, down -2.1%.  It’s relative strength against the XJO peaked in late January and has been sliding since.

XMJ could be on a rebound, but needs to close above the pivot of mid-March to prove its bullish credentials.  Until that happens, we’ll consider any move up to be a counter trend rally.

The strongest momentum stock in XMJ by far is BSL; in fact, it is the strongest momentum stock in the ASX100.   But with a rating of  0.469 it is well off its rating of >0.8 a couple of weeks ago.  BSL was down -7.8% this week.  So there’s not much to recommend it at this stage.  Iluka is next best in the XMJ, but with a rating of 0.077 we can see that there’s a big gap between it and BSL.

Nothing in XMJ looks likely at this stage.

XEJ (Energy):

xej daily.png

XEJ flat this week -0.05%.  XEJ, like XMJ, peaked against the XJO in mid-January and has since been sliding, although it did do a little better against the XJO this week.

The best stock is Origin Energy, but with a momentum rating of  0.15, it is not particularly strong.

 3. XXJ Financials X-Property:

xxj daily.png

XXJ fell this week -1.28% but rose strongly on Friday +1.18%.  It is the third strongest momentum sector in our market.  While it stays on the positive side of the momentum chart, the XJO has a chance of remaining bullish.

The three day candle pattern is a classic bullish reversal pattern, and that pattern is strengthened by the fact that the bounce came off the 65-Day MA.

The strongest stock by far is QBE.  It is currently in a sideways trend and keeping pace, more or less with the XJO.  It needs to break above horizontal resistance at 13.01.  It is currently at 12.82.

QBE is on a dividend yield of 5.1% with 100% franking.  That’s juicy.

XUJ Utilities

xuj daily.png

XUJ rose +1.65% this week and remains in a strong up trend.  It’s the strongest momentum sector in our market.  That doesn’t mean a lot, as it is a relatively small sector.

Ausnet (AST) has become the best performing stock in the sector with a momentum rating of 0.229.  APA and AGL are also performing well.  AST pays a dividend of 5.1% with 100% franking.  Nice.

XNJ Industrials

xnj daily.png

XNJ climbed above the 200-Day MA this week.  The 200-Day MA had formed a curving dome providing resistance to any substantial upside move.  Now that the Sector has climbed above that resistance, and horizontal resistance, it is worth some attention from investors.  Longer term it still needs to climb above major horizontal resistance.

The best stock in this sector was Downer EDI.  That came to a screeching end this week when its capital raising to get funds for its take-over bid of Spotless went poorly.  Downer down on Friday >25%.

Aristocrat Leisure is the top momentum stock with a rating of 0.38.  It has been a perennial top performer for many months.  It is, however, a growth stock and pays poor dividends.  Next best is TCL (momentum rating, 0.2), an infrastructure stock, which pays a dividend of 4.3% but low franking credits.

XSJ Consumer Staples

xsj daily.png

XSJ finished the week well to be up +0.68%.  It is in a solid up trend.

TWE is now the strongest stock in the sector, although it’s not especially strong.  Not a lot appeals in the Consumer Staples sector, unless you want to get the dividends from Woolworths and Wesfarmers.  Woolworths has a slight edge over Wesfarmers on momentum strength, but there’s not much in it.

XHJ Health

xhj daily.png

Health is in a solid up trend, and rose this week +0.91%.  It is currently in a short term sideways trend.  It needs to get above horizontal resistance.  Any pull-back is probably a “buy the dips” scenario.

The two strongest stocks are CSL and RMD.

XPJ Property

xpj daily.png

XPJ flat this week -0.11%.   It remains below the 200-Day MA.

Property is a mixed bunch with the shopping centre stocks (VCX, SCG AND WFD) putting significant drag on the Sector.  GPT is also performing poorly.

Lend Lease, Goodman and Mirvac are all relatively strong (although not especially so).

The strongest stock is LLC.  It’s on a dividend yield of 4% (no franking).

In general, however, there are better opportunities elsewhere rather than in the Property Sector.

XGD Gold Miners

xgd daily.png

XGD down -1.09% this week.  That’s not much for this volatile sector.

This is a volatile industry group with a lot of small cap companies.  Good traders can make money here, but it’s not for investors – unless they’re convinced we’re entering a secular bear market, when Gold tends to outperform.

XGD has the potential to do well in the near future.  The Index is nudging the 200-Day MA, and a short term up trend could see the 13-Day MA burst up through the confluence of the 65-Day and 200-Day MAs (a Gordian Knot?).  If you’re into trading this could pay big dividends in the near future.  Watch.

XDJ – Consumer Discretionary.

xdj daily.png

XDJ is another sector knocking on the 200-Day MA resistance level.

Until, however, it can break above the 200-Day MA, it’s best to treat it with circumspection.

Not too many stocks are doing well in this relatively large sector.  Fairfax (FXJ) is the strongest of them.  It is on a dividend yield of 3.9% with 70% franking.   There are good reasons for avoiding Fairfax.  Much speculation has been reported in the media that it could be a take-over target.  If that speculation proves without foundation, the stock is likely to tank.  This is one for the punters.

XTJ Telecoms.

 

xtj.png Telecoms had a poor week -3.23%.  It is the weakest sector in our market.

Leave this sector alone until we see definite improvement.

Summing Up:

Our market surprised on Friday with a solid performance +0.8%, and that completed a bullish three day reversal off the 65-Day MA.  That’s looking positive while the media is laced with doom and gloom over the political situation in America.

We need to see our market close convincingly above overhead resistance around 5813 before considering putting more money into this market.  Either that or see a reasonable fall and then a bounce off support of 5580.

The market is in transition from a Risk-On market to a Risk-Off market.  That doesn’t mean it can’t go higher, but if it does, it will probably be lead by more defensive issues and Financials rather than the big stocks in the cyclical sectors such as XMJ and XEJ.

With the prospect of a market in transition, risk is increasing for investors. It might pay to re-assess portfolios of stocks and be prepared to sell some winners and look to invest in some of the improvers.

Stick to the strongest sectors, and pick stocks selectively.

RB

Categories: Uncategorized

Saturday Thoughts. 25 March, 2017.

March 25, 2017 Comments off
In Australia yesterday:
Screen Shot 2017-03-25 at 1.34.07 PM.png
XJO up +0.8% on low volume.
That was promising coming off the low of two days ago.  But we have lots of resistance overhead, and lots of support underneath.  We’ll just have to wait and see how this plays out.  We might get a bit more sideways action before anything definitive.
The strong, unexpected, rebound in Australia yesterday looked like our market was pre-empting the Americans on the expectation that political uncertainty surrounding the health care bill would be resolved favourably.  That didn’t happen.  So that suggests we’ll see a fall in our market on Monday.
In America:

DJ -0.29%, SP500 -0.08%,  Nasdaq +0.19%, NYA -0.11%, Russell2000 +0.09%.

Screen Shot 2017-03-25 at 1.44.42 PM.png
The media was full of the political uncertainty provided by the health care bill.  That was considered the major influence on the market in the afternoon period.  It was certainly volatile during that time.  It could be that weekly options expiry also had a big effect.  Knowing “causes” for stock market movements is an arcane art – usually employed ex-post facto.  Let’s just watch the charts.
This is now looking more like a bearish formation rather than a rebound.  We’ll just have to wait and see.
The Banks sub-index (BKX) was flat +0.06%.
SP500:
 SPX.png
After hitting the “too high” level in early March, the Index has now hit the “too low” level on the Standard Error Channel.  That suggests this downside move is probably nearing its end.
Short term Stochastic (14,3,5) is now into the oversold zone, where it can stay for sometime.  Being in that zone does, however, suggests an up turn sooner rather than later.  We could see a bit more downside, perhaps even to the 65-DMA, but I think that’s all there is in this move.

 

Commodities:

 

DBC +0.34%.  Industrial Metals +0.15%.  Energy +0.5%.  Gold +0.16%.

ETF tracking Copper producers (COPX) was down -0.84%.  BHP in America was down in line with COPX -0.84%.  Those figures don’t look good for our miners on Monday.

Full Weekly Report tomorrow when I’ll give views on movements in Australian market sectors.

 

RB

Categories: Uncategorized

Friday Morning Joe. 24 March, 2017.

March 24, 2017 Comments off
In America:

DJ -0.02%, SP500 -0.11%,  Nasdaq -0.7%, NYA +0.04%, Russell2000 +0.58%.  Except for R2K, indices finished flat after intra-day selling brought them off their highs.

Screen Shot 2017-03-23 at 8.09.54 AM.png
Intra-day selling occurred as a result of political uncertainty over the future Trump’s Health Care bill in Congress.
The Banks sub-index (BKX) was up +0.36%.
SP500:
 Screen Shot 2017-03-24 at 8.45.14 AM.png
After hitting the “too high” level in early March, the Index has now hit the “too low” level on the Standard Error Channel.  That suggests this downside move is probably nearing its end.
Short term Stochastic (14,3,5) is now into the oversold zone, where it can stay for sometime.  Being in that zone does, however, suggest an up turn sooner rather than later.

 

Commodities:

 

DBC -0.2%.  Industrial Metals -0.21%.  Energy -0.25%.  Gold -0.13%. Iron Ore +1.7%

ETF tracking Copper producers was down -0.4%.

The big Iron Ore miners should be +ve today, but other miners might struggle.

It looks like another indecisive, range bound day today.  If the Big Four Banks can turn in a positive result we could end on the plus side today.

RB

Categories: Uncategorized

Thursday Evening Thoughts. 23 March, 2017.

March 23, 2017 Comments off

XJO up moderately today +0.41%.  Volume was low for a Thursday.  That suggests to me that a lot of trading programs were sitting in stalled zone.  Don’t buy, don’t sell.  Retailers pushed the market up a bit.  Not very decisive.

Screen Shot 2017-03-23 at 6.31.20 PM.png

We need to see the machines kick in – and produce a big upside day.

But – you know my bias.  I think this has come down far enough to set off another upside move.

RB.

Categories: Uncategorized

Thursday Morning Joe. 23 March, 2017.

March 23, 2017 Comments off
In America:

DJ -0.03%, SP500 +0.19%,  Nasdaq +0.48%, NYA +0.05%, Russell2000 -0.07%.  Except for Nasdaq, indices finished flat after intra-day buying brought them off their lows.

Screen Shot 2017-03-23 at 8.09.54 AM.png
 This may be the end of the pull-back.  This session’s candle on R2K is particularly noteworthy.  That’s the sort of candle we see at the end of pull-backs.  It needs a strong up day to confirm.
SP500:
 Screen Shot 2017-03-23 at 8.07.23 AM.png
After hitting the “too high” level in early March, the Index has now hit the “too low” level on the Standard Error Channel.  That suggests this downside move is probably nearing its end.  Short term Stochastic (14,3,5) is just above the oversold level.  That suggests we could see some more down side.  But if that happens, it shouldn’t be too vicious.

Today’s low was also at the 50% retracement level of the rally from 31 January to 1 March.

A few days ago I stated that I’d like to see a quick plunge down to the lower line of the SEC.  That’s what I’ve now got.  Let’s see if the long term up trend can now continue to the up side.

Commodities:

 

DBC -0.07%.  Industrial Metals +1.17%.  Energy -0.17%.  Gold +0.24%. Iron Ore -3.7%

ETF tracking Copper producers was up +0.66%.

We should have a better day today after yesterday’s rout.

RB

Categories: Uncategorized

Wednesday Evening Thoughts. 22 March, 2017.

March 22, 2017 Comments off

XJO down today -1.56%. Volume was below average.  This looks like nervous nellie selling.

Screen Shot 2017-03-22 at 9.42.56 PM.png

The chart is down to the lower edge of the Standard Error Channel.  Expect a move to the upside in the next few days.

Using standard technical analysis, there’s a lot to be nervous about at this stage.  MACD histogram has broken below the zero line.  Not shown on this chart is a break of the up trend line.  The 65-Day MA has broken to the down side.

I have doubts that standard technical analysis methods work any more.

Clearly we had panic selling today.

Usually the herd, in the extreme case, is wrong.

I think we’re closer to the end of a short term pull back than we are to the start of a major correction.

Anyway – we’re now in casino land.  Your bet is as good as mine.  I’m being a contrarian right now.

Screen Shot 2017-03-22 at 9.56.28 PM.png

 

RB.

 

Categories: Uncategorized

Wednesday Morning Joe. 22 March, 2017.

March 22, 2017 Comments off
In America:

DJ -1.14%, SP500 -1.24%,  Nasdaq -1.83%, NYA -1.18%, Russell2000 -2.71%.  Those broad market indices’ results look bad – but the Banks were even worse, -3.92%.

Screen Shot 2017-03-22 at 8.25.16 AM.png
 An outside day candle with high volume.  Those broad market indices are now bearish.  (Bleeding obvious?)
SP500:
 Screen Shot 2017-03-22 at 8.39.49 AM.png

Here’s the headline from today’s CNBC:

For the first time since the election, Trump optimism is showing signs of cracking

With headlines like those, you can already see the pile of “sell” orders growing in Australia.

But, this market move started back on March 2.  See the notation “Too High”.  On March 1, the SPX gapped up and then moved strongly higher.  Most of that was lost on March 2, which set in motion a move from the top of the Standard Error Channel to the bottom of the SEC.  That move has now been achieved.  A little more downside could occur – Indicators have still not reached over-sold levels.  When they do, we should get a move to the upside, and, probably a test of the recent high.  We could, of course, be starting a big down side move, which will result in the drawing of a new SEC heading down instead of up.

Commodities:

 

DBC -0.55%.  Industrial Metals -1.13%.  Energy -0.74%.  Gold +0.83%. Iron Ore -3.6%

No need to state the obvious.

RB

Categories: Uncategorized