I've simplified the layout of the report this week. I'm relying more on Point Form in notes on the charts. This should help the Generation Xers :) - but I can't reduce myself to using shorthand texting (yet) to satisfy the Gen Yers.
If you don't want to plough through all the detail and want the guts - just slip down to the end of the Report to the "Summary and Conclusion" section. Towards the end of the report I've put some ideas about the recent Gerry Harvey Event - which I believe is indicative of a general malaise in the Australian economy, not just a bleat against international internet sellers.
* XAO remains above the 10-Month Moving Average: Positive * MACD above its signal line: Positive * RSI above its mid-line. Positive * Williams%R above its mid-line. Positive. * Long term the outlook remains bullish.
Weekly Chart - XAO:
* XAO dropping from resistance set up Nov.2010 and Oct.2090. (Horizontal line.) * Negative divergence from chart on both the RSI.9 and the MACD Histogram. Negative * Weekly Slow Stochastic has now dropped below both the overbought level and its signal line. Negative * This chart has now turned medium-term bearish. * Caution required.
Daily Chart - XAO:
* RSI.14 below its mid-line. Negative * MACD Histogram below its mid-line. Negative. * Slow Stochastic (5,5) at 20.76. Oversold. XAO could bounce. * XAO sitting on 50-Day Moving Average and 4th Ray of the Fibonacci rays. That?s a likely place for a bounce. * XAO now at a critical point. * Bounce here and then fall - very bearish * Rise and break above recent resistance - very bullish.
Ozzie Dollar:
* Last week this Chart had warning signs all over it. * This week: Slow Stochastic (5,5) is oversold and Chart sits on the 50-Day Moving Average. * Bounce here is likely. (But could be short-lived a la mid-November.)
Dow Jones:
* RSI - Overbought. Bearish * Negative Divergence on MACD Histogram. Bearish * Thursday?s action: short stumpy candle on heavy volume (arrow) suggests strong hands distributing to weak hands. Bearish. * Slow Stochastic (5,5) below its signal line. A break below 80 would complete the bearish scenario.
Comparison: S&P500/Shanghai:
* Shanghai often leads the world markets up and down. (See April). * Big negative divergence now exists between the American market and the Shanghai market. * Three alternatives: Dow moves down? Or Shanghai moves up? Or the two meet? * History suggests the first alternative. Dow moves down.
Copper:
* Copper has broken below its uptrend line from late November. Bearish * RSI was overbought (above 70) now falling. Bearish * MACD has broken below its signal line. Bearish. * MACD Histogram showed a negative divergence from the Chart. Bearish * Slow Stochastic (5,5) is heading down and still above the oversold level. Bearish. * The 410 area looks a likely support area.
The ?Gerry Harvey? Chart - Consumer Discretionary and the XAO:
* This is a ratio chart of XDJ/XAO (Consumer Discretionary compared to the All Ordinaries.) * No wonder Gerry and his friends are conducting a campaign against the internet sellers. This chart is disastrous. * The Chart broke long term support in September and did the swan dive. * But - see the next chart.
ConsumerDiscretionary/ConsumerStaples:
* This is a ratio chart of ConsumerDiscretionary and ConsumerStaples HarveyNorman & DavidJones versus Woolies & Coles (plasma TVs and Fancy Shoes versus FruitandVeg and Beer) * Consumer Discretionary has outperformed Consumer Staples since August. * Huh. Is everybody buying their Fruit and Veg from overseas eBay sites? * Nope - these two ratio charts are sending a much more fundamental message about the Australian economy. * And it ain?t positive. * Gerry Harvey?s pulling the old Protectionism racket to save the Consumer Discretionary sector. And Protectionism doesn?t work. * Finally - just my opinion, on the basis of these charts the Reserve Bank won?t be raising interest rates any time soon.
Summary and Conclusion:
* The markets took on a bearish tone this week. * The medium term chart (XAO Weekly) is weak. * Short term (XAO daily) the market is oversold and may bounce. * Overseas charts (Dow, SPX, Copper, Shanghai) are all looking negative. * Ben Bernanke?s QE2 program will probably sustain the American market in the long term. * The Gerry Harvey Event is indicative of a serious underlying problem in the Australian economy. * It seems to me that any Reserve Bank rises for 2011 are now on the back burner. (With floods in Queensland, New South Wales and Western Australia hitting the Agricultural and Pastoral sectors, interest rate rises seem even more remote.) But the RB doesn?t ask for my opinion. :)
(20min delay)