Major global markets are no longer highly correlated. American SP500 up this week +0.76%. Australian XJO down this week -1.04%.
August is now upon us. Seasonally, August is a 50/50 proposition, so our market could easily fall.
Materials and Financials both fell heavily this week; they make up more than 50% of our market by capitalisation. XMJ (Materials) has joined XXJ (Financials) in the category of "dog" sectors on an intermediate term perspective.
So far we're not in the midst of a big break-down, but any further deterioration could see accelerated selling.
This week sees Earning Season start in earnest. So how market is likely to have big swings as reports start coming in.
XJO Charts, Daily, Weekly, Monthly.
Internals – Australian Market.
Copper
Oz Metals and Miners.
Financials, XXJ
XJO Charts, Daily, Weekly.
XJO Daily:
XJO is on a "do not buy" signal. Short-term trend channel has turned down. Intermediate-term trend channel has levelled out.
XJO has been in a sideways shuffle since 21 June. Wait to see which way this breaks.
XJO Weekly:
XJO was down this week -1.04%.
The chart is in a wave-like structure in a long-term up-sloping channel.
The weekly chart is close to the top of the Standard Error Channel. More upside could occur, but some sort of pull-back or consolidation in the near future is likely. Wait.
XJO Monthly:
Since late 2016, XJO has been in a narrow up-trend channel (within a broader Standard Error Channel). It is at the top of that narrow up-trend channel. Expect a pull-back to horizontal support at 5976, or perhaps, a little further down to the bottom of the narrow up-trend channel.
A short-term pull-back seems likely.
In the long-term, the XJO looks likely to test the 2007 high by the end of the year. Buy dips.
INTERNALS – AUSTRALIAN MARKET.
The number of stocks in the ASX100 that are above their 200-Day MA hasn' moved much this week, 73% in the previous week, 72% this week. This is a long-term indicator and keeps the Index solidly in bullish territory, and the trend is rising steadily.
Percent of ASX100 Stocks positive on the Directional Movement Index fell this week from 78.8% to 65.7%. This is a short-term indicator. That fall is consistent with the >1% fall in the XJO. This can fall further without much damage to the long-term bullish condition.
Five out of 11 Sectors were down this week. The worst result was in the XMJ (Materials) -2.38%. Next worst was XXJ (Financials) down -2.04%. Those are the two biggest sectors in our market making up >50% of the market capitalisation. So it was a relatively good effort by the broad market to be down only ~1%.
Here's the Weekly Change chart:
XTJ was the best performer, +2.05% after Telstra announced an organisational restructure. This may be a turn-around point for Telstra, but we need more evidence before being convinced. TPM also performed strongly +2.45% and is back above its 200-Day EMA.
Here's Sector Changes on a 12-Week basis:
Health has consistently been a top performer.
XMJ is turning into a "dog". Look to Energy for exposure to resources.
Copper Futures:
I had high hopes for Copper about two weeks ago. I said: "The worst seems to be over for Copper". It just goes to show that when a stock or commodity is below its 200-Day EMA - don't expect anything more than counter-trend rallies.
Copper continues to languish at its lows. I still feel confident that we'll see a rally - but probably only a counter-trend rally.
Our miners have been particularly resilient in the face of the fall in Copper.
XMM (Oz Metals and Mining). Daily Chart.
XMM down this week -3.5%. It remains within its gently descending trend channel. But cracks are beginning to appear in individual stocks, the most striking example being RIO:
RIO reported after-hours on Wednesday, then fell >4% on Thursday. That saw carry-through selling on Friday which took the index below its 200-Day EMA. It has also formed a complex bearish head/n/shoulders pattern which doesn't augur well. Unless it can recover quickly we may see may down-side.
XXJ (Financials) Daily Chart.
XXJ has fallen below the key 200-Day EMA. It is now sitting on horizontal support and the 50-Day EMA. So it might be OK. But it appears to be forming a rounding top which could lead to much more downside.
(20min delay)