Perfection. I hate to even think about using that word because as soon as one thinks things are perfect, the market will turn around just to prove one wrong. So dare I…..
Well here goes.
There are so many charts clamouring for attention, it is hard to know where to start. I feel as though I could fill a whole book today but I won’t bore everyone to that extent. So I will start by updating a chart I included a couple of weeks ago – the daily close of the S&P (semi-log scale). See what I mean about perfection. Broke out of that lovely little triangle and at the same time broke the downtrend. Last week I mentioned that after sentiment had changed so dramatically during the previous week, I thought we probably had to have a bit of a correction – we did – two days! That is a definite sign of strength. So now it is up to the first hurdle – let’s just hope it doesn’t have to jump too high to get over it. But also remember, nothing goes up in a straight line – well not in stock markets anyway. Also need to monitor sentiment closely over coming days. As soon as everyone starts telling us the bottom is in etc. then we probably will have a bit bigger consolidation.
View attachment 4560346And if you needed any further proof of what has happened this week, here is the updated daily of the RUT. Again a very pretty little picture but will run into overhead resistance on any further appreciation. Goodness this stock has been a good indicator lately. Smaller stocks – probably saying something about the market on its own when many of the “big stocks” had quite serious baths over the past few months.
View attachment 4560349A couple of weeks ago I included a chart showing the ten-year yield in Australia and the US. I have updated it again this week – Australia black and the US in red which shows that yields have continued to ease. The arrows on this chart indicate where the Reserve Bank lifted our rates with expectations they will do so again this week so they will have nicely enclosed what looks increasingly like a top in rates – well at least for the time being. I can only look at this chart in absolute horror – our rates went from under one percent to three and a half before they moved and were still saying that rates wouldn’t rise till 2024 just a few months ago. How can they be so wrong when they hold such an important lever for the Australian economy? Obviously, the US authorities were no better.
View attachment 4560352The US dollar – today I am going to show a different picture – the Swissy. Looks like it has formed a nice big base and on the verge of breaking topside. Worth keeping an eye on this over coming days.
View attachment 4560355And B.Com. Trying to put all these charts together can get complicated. Here I have the Swissy suggesting that the US dollar will weaken but B.Com which has gone up for six straight days has quickly ran back up to the overhead resistance band. It looks to me that it needs to do a bit of work.
View attachment 4560361BUT – how I hate that word – the whole picture doesn’t seem right when we look at precious metals that had an excellent few trading days. This week I am including the daily of silver together with the gold/silver ratio (scale inverted). I always like silver to lead the precious metals which it hasn’t been doing the past few months but that picture changed last week when we see what the GSR did by breaking its recent downtrend. Tough overhead resistance in silver once it gets up around $22. So I have the US dollar looking toppy, B.Com looking like it needs to do a bit of work yet precious metals very bullish. Something doesn’t seem to add up. I suppose all we can do is let the market work it out.
View attachment 4560364Australia wasn’t overlooked when it came to the recent rush of enthusiasm. Updating the chart of XJO that I included last week. We see that we have clearly broken the downtrend but has run straight up into overhead resistance. At the same time the XTL – 20 Leaders (not shown) has had eight consecutive days of rises with the indicator on that index already in overbought territory. As with New York, I think we will see a correction in the next couple of days. Won’t necessarily be bad for the market. Depending how such a correction takes place, it could go a long way towards my original idea that markets were going to go back up to their highs.
View attachment 4560367Having shown all these “nice” charts, I am now going to include one to worry about – just to keep everything on an even keel – London’s FTSE. Note how this index is now back up against the overhead resistance. Going to be tough here but for balance, we need to keep this chart in mind.
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