XJO Weekend Charting and Chat - 6th Oct 2017, page-23

XJO can be likened to a proxy for XTL (ASX 20). Note the high correlation re Friday's XJO (+ 1.04%) vs. XTL (+ 1.10%) close. XTL looks weaker on a chart. This makes sense given the XTL's large composition of low diversification, performance outlook stocks. Lots of dividend paying stocks, but at the sacrifice of growth. Overseas institutional investors possibly see our four large ASX 20 banks as having downside risk. WOW and WES under pressure under pressure from retail competitors. TLS, BXB, CBA, QBE, SCG, WFD, WPL, WOW all in strong downtrends. TLS is in a severe downtrend.

The longer-term averages are all headed down. Hence my trading strategy is to short on relative short-term strength. I anticipate the most difficult trading decision will be when I again take profits near the bottom of the ~ 5650 - 5780 XJO trading band, but XJO falls the next day down to ~ 5600. That's when it will be tough taking on another short position. It will have to be done, but with a stop loss just above the previous day's high.

Hedging my long portfolio is the other reason for trading the XJO trading band.