Weekend Charting and Chat. 14/15 Dec., page-4

Weekly Wrap.

It’s been a dry, turgid week on the Australian market. Three days up and two down, with the past three days capped by the 50% retracement of the drop from 29 November to 4 December. All five days of the week found support at the 50-Day EMA. Thus, we’ve had a slow steady sideways consolidation. Frustrating for swing traders and longer term investors hoping for a Santa Rally.

Such sideways markets indicate indecision.

Three out four indicators suggest buying. The fourth one could turn positive on Monday, if the Market Gods deign to smile on us.

On the negative side, the 80-Day Hull MA is blue – indicating a medium-term negative bias. The shorter-term 20-Day Hull MA is also blue and dropped below the 80-Day MA. That’s usually a sign to “sell-the-rallies”. If we are to get a Santa Rally, the coming week is crucial.

In the week before this, a lot of short-term damage was done to ASX100 stocks and this week has done little to repair the damage. Momentum on the XJO has now turned slightly negative.

Less than half the ASX Sectors are positive in the short-term. 73% remain positive in the medium-term. To add to the negative sentiment, the long-term trend for Financials (XXJ) has turned negative.

The bright spot in our market has been resources. Miners and Metals (XMM) was up every day this week to finish up for the week +3.87%:

Energy (XEJ) also did well, but not as good as the Miners. XEJ up 2.17% for the week:

Financials (XXJ) had a rush of blood on Friday. XXJ up +1.39% on Friday. The 20-Day MA has turned positive so we may see a counter-trend rally here – but don’t hope for more than that.

Here’s the Cumulative Momentum Index for Large Cap Stocks with Low Volatility:

CSL and SYD look healthy, but the Relative Strength reading tells a different story:

SYD is now negative on relative strength and should have been discarded early this week. The only stock that seems worth holding is CSL and it is looking shaky.

In ETFs, the only three with positive momentum are IOO (International Shares), IEM (Emerging Markets) and OZR (Australian Resources).

Seasonally, the market tends to be weak in the first half of December and strong in the second half (Santa Rally). That may be playing out again this year. The China/US Phase One Trade Deal has been completed and Boris has removed any further doubts about Brexit with a resounding victory in the British elections.

With those two concerns out of the way, the market has a clear run at a Santa Rally if it can overcome its current inertia. Look for a big up day in risky assets on Monday.