So many interesting charts this week. I could seriously fill a book if I had the time.
I can’t resist starting with the weekly close chart of the US ten-year rate (red) and the Australian ten-year rate (black).
Looking back at trading for 2020 we see that the Australian rate basically sat just under one percent for the whole year while New York got a fraction below half of one percent – and then they both broke topside. We were then consistently assured before the increases came (the arrows) that our rates would not go up until 2024. Now this week, I am pretty sure that I heard – straight from the horse’s mouth – that rates won’t go down till 2024. Any wonder that a Simple Little Chartist can only look on in absolute horror. I really didn’t know whether to laugh or cry – so I settled for another glass of wine. I have mentioned before that when the time comes, they will probably continue to raise rates, long after they are needed. We are, as usual, going to have to be guided by the real market which is highlighted in this chart.
And now the XJO. I like the way quite a few markets ended the week, and I am hoping we will see this improvement spill over into our own little patch. If we can rally further here, I think we will be able to completely discount that potential head and shoulders top pattern. I have consistently maintained that it was “too perfect” and as I keep mentioning, the market doesn’t like things to be too obvious. I would rather think that we are travelling in that wide uptrend I have drawn on the chart. But, and don’t I always have a but, if we do rally, I want to see this index break through those old highs. Otherwise we really could be forming that most horrid major top. So the good and the bad news!
This time something a bit different. XSO – but on the lower part of the chart, I have the ratio of the XSO against the XJO. The XSO is taken from the 300 excluding the top 100 stocks. So it is basically a look at the smaller end of the investment market. Now interestingly, note how the ratio has been falling but it has broken topside out of this very perfectly formed sideways movement. I took the figures back to the beginning of 2022 and it has been getting lower the whole time. So what I am thinking here is that perhaps people were prepared to sacrifice the “cheaper” stocks while holding on to the “top” stocks but if this is now changing, I think it could be a very bullish signal. Need to see how we go over the next few weeks.
Updating the NASDAQ Comp we see that it actually finished this week where it was last week but just looks a bit better as the low on Thursday was still a bit higher than the previous low the week before. Still really important to watch this one.
Analysing that sector further, the first chart here is QQQ the ETF of the NASDAQ 100 and QQEW the NASDAQ 100 stocks all equally weighted. We all know that the big tech stocks have been driving the whole US scene recently. This chart highlights this very clearly as when we weigh them all equally it hasn’t performed quite as well. I actually think both charts look encouraging but once we see QQEW break topside, we will be aware that the other stocks are starting to have an influence – or in other words – the advance will be broader.
Shanghai has been a frustrating market for such a long time with its inability to actually perform as well as many other markets. But looking here at the daily and the trading since the beginning of last year, could this be a really nice big base pattern. I think this is really going to be a very important chart to watch in the next few weeks.
And Japan – here I have the weekly close (semi-log scale). Look at this sideways action. Looking a bit sexy at the moment. Could it run up and close above that top line I have drawn? Another chart that should tell us more in coming weeks.
Gold – how it loves to trap people at tops and bottoms. Just look how it ran up there just to catch all the people waiting for a break-out and then throw them to the wolves on Friday. I have an uptrend channel drawn in there. I think it is very important to watch the uptrend. If it just comes back and continues to trade around that line, then all is well but if it breaks that line by more than a few points, I think a consolidation might take a bit longer.
Back to B.Com. This chart highlights the problem I have with quite a few commodities. Crawling along the bottom. We have quite a few important commodities doing this – uranium next chart, lithium, well we hope it is a bottom although at this stage it has only broken its steep downtrend with the ETF still crawling along the bottom, copper, oil etc. etc. Markets don’t like too much of this sideways action. I want to see some strength otherwise the risk is that they could all break down again and that quite frankly would be an absolute disaster. So looking at B.Com, it picked up a bit at the close of the week as it came back to the previous lows and finished slightly better. But I want to see a bit more positive action.
And just look at what uranium has done - nudged higher again this week. This is now the best price we have had here for a year. Not sure what it is going to take to make the ETF move but I am getting quite enthused with this picture.
At the end of all these charts, I think the outlook is looking quite a bit more encouraging. But as usual, we all know things could still fall apart. Just have to be on our toes. At the beginning of the year my title for the first half of this year was “muddle through”. So far that seems to fit the bill. At that time I was looking for a high in January and a low in March with a high in June/July. Got the first couple of timelines. Can I get the next high. Reminded again on the weekend just how perilous Eastern Europe is.
(20min delay)