Comment: A similar day to yesterday with major indices up moderately but off their highs. During the lunch session the market was well off its highs, but recovered some of that in the afternoon session. 20-Day Relative Volume was once again high at 117%.
Technical Comment on the ASX200: The XJO finished at 4617.8. Oblique resistance lies at 4628.8. Today the XJO got to 4627.8 before pulling back. Close enough. Indicators: Stochastic: 89. Overbought. Above its signal line. RSI: 77.4. Overbought. That's too high. MACD Histogram. Below zero. Negative. But rising. MACD: Above zero. Positive. CCI: +118.5. Overbought. Negative divergence.
I said yesterday: " This remains a market where the major risks are to the downside." It's worse now.
BHP Chart.
That's eleven days up in a row for BHP. RSI is almost up to 90. This has now reached insane levels. If the stock continues going up with the expected Santa Rally into early January - then there's going to be one hell of a bust in January. Even now it is looking highly dangerous. It can, of course, continue to go up. Anything is possible. But the further it goes, the bigger the bubble, and bubbles always burst.
CBA Chart
CBA has finally broken below the bearish rising wedge. But the break doesn't look decisive. We could be seeing more consolidation or a minor pull back. A big down day would look ugly.
It's difficult to think that one should enter this market to take advantage of the expected Santa Rally. Everything points to down side risk. If the force of money flowing into the market occurs this year as it normally does at this time of the year (that's why we have a Santa Rally), then this market will look totally irrational by the second day of trading in 2013. And we'd then be looking at a substantial correction.
The XJO is now at a crucial oblique resistance line (across the tops of May and October). XJO is overbought, and some stocks like BHP are looking insane. If this is going to pull back, at least for a few days, then this is the time it should happen based on Technical Analysis.
Although the historical record for late December is too good to ignore, just remember, December 2007 was down 2.96% and December 2008 was down -0.54%. So there's nothing sacrosanct about December.
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