Comment: A solid up day with Materials and Energy doing the best. The defensives were mainly under pressure (Telecoms -1%, Utilities, -0.2%, and Consumer Staples and Health weaker than the general market ).
I've never been able to understand why, but Information Technology often acts like a defensive. Today it was down -0.4%.
Volume was high – a bit above the 10-Day and 50-Day Averages, but not excessively so. Interestingly, 20% of the 50 Leaders recorded falls today. So there's been a fair amount of switching going on between stocks/sectors - with the riskier assets coming into play (Materials and Energy). That's a good sign. It's an indication that confidence is returning to the market.
INDICATORS: RSI.9: 62.5. Above 50. Positive. MACD (zero-lag) Histogram. Above Zero. Positive. MACD (zero-lag). Above zero. Positive. Stochastic: 65.2. Above its signal line. Positive. 8-DSMA below the 34-DSMA. Negative. Directional Movement Histogram - Above zero. Positive. CCI.20: +131.64. Overbought. (I usually show a CCI.14 which would be giving an even more overbought reading.) But no typical divergence yet suggesting a pull-back. The chart is above both the 8-Day and 34-Day MA. Positive. But right at the 50-DMA. That could hold up proceedings.
The XJO closed at 4162.9. That's right at the next line of resistance. So - we've got a double whammy resistance - horizontal resistance and the 50-Day Moving Average. The quality of this move has been high - virtually no overlaps in the past three days' candles. Compare that to previous rises and you'll see plenty of overlaps in the candles. This has been an impulsive move - often seen at the start of bull rallies. But it's come a long way in a short period of time.
In this morning's blog I showed a lack of confidence in the American market to continue on with its upward movement. If the jobs number tonight is positive - the market might overcome its current hesitancy and the Australian market might have some more upward movement. It's not often I think the "news" moves the market - but two regular events do have that ability (the Jobs Report and the Fed Decision). So tonight could be important.
At this stage, the short term trend is up. The medium term trend is at resistance and positive but unconfirmed. (I'd need the weekly Stochastic to cross above its signal line for confirmation.) The past three weeks has developed a classic reversal pattern.
The chart shows a clear double bottom. Some consolidation might be seen in the near term, but a number of factors suggest the current short term trend has the makings of a bull rally.
For the long term, 4300 needs to be overcome and a positive 8/34MA x-over is needed.
I'm mindful that historically the first week of October tends to be strong, the next two weeks weak, and the last week strong. If the next two weeks defy historical precedent, then we might find that November is weak. :( That's what happened last year. But that's getting a wee bit ahead of the game.
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