Weekend Charts and Chat. 1/2 August, page-18

Weekly Wrap. Week ended 31/7/20. XJO on the brink.

Last week, I prefaced the Weekly Wrap with a note that breadth was weakening. That often precedes a fall in the market. That happened this week, with the XJO down -1.6%
XJO Charts:

This week's candle is perched right on the 8-Week EMA. It first crossed above that marker back in mid-May. A break below the 8-Week EMA would be bearish.

The last three weeks shows a bearish reversal pattern. A bullish candle, then an indecisive doji candle, followed by a bearish candle. Another week down would confirm the bearish break to the down-side.

In yesterday's daily report, I noted the XJO had formed a small head/n/shoulders pattern - which often precedes a downside move.

XJO is on the brink of a downside move. Next week becomes important for the health of the Australian market.

Breadth.

Breadth continued to fall this week. So much so that the market may becoming short-term oversold, so we could get a bounce here.

Stocks above the 200-Day MA fell from 33% two weeks ago to 31% this week. That metric tends to change slowing. The drop in breadth is more clearly seen in the next two stats.

Stocks above the 50-Day MA fell from 62% two weeks ago to 39% this week, while stocks above the 10-Day MA showed a marked drop from 84% two weeks ago to 17% this week.

The crack in the dyke has widened this week.

Large-Cap stocks with low Volatility:

Wesfarmers (WES) and (SHL) have been picks for some weeks. Both show that their uptrends have stalled. Both WES and SHL have given two sell signals. Both should be eliminated. WOW was added three weeks ago. WOW has given two sell signals this week and the previous week. Dynamic RSI has confirmed the sell signal on Friday. MQG was added two weeks ago but gave a clear sell signal on Friday.

So we have no stocks with low volatility left in the portfolio.

ETFs:

The only ETF remaining above its 8-Day EMA is IAF. IAF is an Australian composite bond fund - a great defensive holding if the market craters. It doesn't move much, so it remains "mixed" using the Triple Supertrends, but it is in an up-trend, breaking out above its recent sideways trend and above its 50-Day MA. It is looking good in a weakening market.

GDX (Gold Miners) is in the positive list last week, but even it fell this week despite a surging gold price. Gold Mining Stocks often fall before the Gold price falls.

It's difficult to be optimistic about our market given events of the past week. But anything can happen in the market. Short term, we could be oversold using breadth metrics, so we could get a bounce. If the bounce is weak, then that will provide an opportunity to loosen up on stocks.

With only IAF giving a positive signal out of the stocks/ETFs that I monitor closely, that should be enough to give investors/traders cause for concern. IAF is a composite bond fund which often outperforms in times of stock market weakness.

Good luck with your trading and investing this coming week.