Postprandials, Thursday, 31 January, 2013

XJO – Daily

In Australia:

1. Twenty Leaders -0.5%
2. 50 Leaders -0.4%
3. XJO -0.4%
4. XAO (All Ords) -0.4%
5. Small Ordinaries -0.3%
6. Financials -0.2%
7. Materials -0.4%
8. Consumer Staples -1.1%
9. Energy -0.8%
10. Health -1.1%
11. Telecoms +0.2%
12. Consumer Discretionary +0.3%
13. Utilities -1.1%

Comment:  The market was down modestly today on relatively high volume.  Volume at 118% of the 20-Day Average is high – but the fall was modest suggesting some buying pressure.  Defensives, in the main, were again relatively weak.  So that suggests we’re in “pause” mode rather than a full-blown retreat.  That could easily change if we see a big down day.

Technical Comment on the ASX200:

1. The XJO finished at 4878.8.  Today’s candle was technically a bearish engulfing candle, but the size was relatively modest.

• Stochastic: 92.7.  Overbought, but falling below its signal line.
• RSI:  80.5.  Very Overbought.  Still above its trend line from mid-November.
• MACD Histogram. Above zero but falling.  Short term longs will now be out of this market.
• MACD:  Above zero.  Positive.  Negative divergence possible setting up.
• CCI:  +130.9.    Overbought.

Today’s action was the biggest fall since 8 January, but still modest.  The chart hasn’t gone anywhere near the middle Bollinger line (20-Day MA) since late November, 2012.  It’s normal for that to be tested and then rebound.  If that rebound fails, we could be looking at something serious to the downside; but, at the moment, bulls are still sitting pretty.

Here’s the Small Ordinaries Chart.  XSO often leads.

Small Ordinaries – Daily

This provides some cause for concern.  Indicators have given a consensus sell signal.  But today’s candle shows a long lower tail, suggesting buying support – right at horizontal and oblique support.

The chart hasn’t been as strong as the XJO suggesting some lack of relative strength in the broad market; i.e., the market has largely been dependent on strength in the big blue chips.  That’s always a concern.

However, at this stage, there is not enough evidence to suggest we’re in anything but “pause” mode.   I’m quite willing to allow the market to prove me wrong.  🙂

Redbacka