ContentsIntroductionSTW - ETF for XJO. STW with Andrew's...

Contents

1. Introduction
2. STW - ETF for XJO.
3. STW with Andrew's Pitchfork
4. Sector Performance this Week.
5. Sentiment
6. Stocks above key MAs.
7. Conclusion.

Introduction.

XJO had another positive week, +0.79%. It's been up each week for the past four weeks for a total rise in those four weeks of +6.54%.

Chart for STW - ETF for XJO.

Thursday and Friday on STW were unusual. Both days were flat - nothing unusual about that. But volume was high on Thursday and higher on Friday. 

Usually, coming into the Xmas break, volume slows down as traders vacate their desks, have parties, drink booze, imbibe illicit substances, etc.

Thursday and Friday were unusually high volumes on STW. On "normal" days that would be noteworthy, coming into Xmas it is confounding.

Those two days are occurring at a high volume node (long narrow rectangle on the left of the chart) - a level where much higher volumes have occurred.

That usually means a battle between the bulls and the bears, coming at the top of a long up-trend, it usually means the last throw of the dice by "naive" bulls before being slaughtered by the bears. But - this is the "silly" season - so anything could happen.

The three Supertrend Lines provide a quick guide to the state of the trend. Three yellow lines = up trend. Mixed colours (yellow and blue) = trend may be changing. Three blue lines = down trend.

The Supertrend Lines are currently all yellow so the trend is up. (Stay with the trend.). Note, however, that the three yellow lines are all now running parallel and sideways - consolidation. Consolidation can lead to more upside - or change to the downside. Be cautious.

STW with Andrew's Pitchfork.

Andrew's Pitchfork is both a "trend following" system and a "mean reverting" system.

If the Chart gets above the median line then it is likely to test the upper-most line of the Pitchfork. (Trend Following).

If the Chart gets to the outer-line of the Pitchfork, it will tend to revert to the median.

Currently, the chart is testing the upper-line of the Pitchfork. So we can expect a reversion to the middle line of the Pitchfork.

Sector Performance for the past four weeks.

In the past four weeks, sectors have generally performed well with the exception being Utilities (XUJ) down -0.77%.

Two sectors have recorded results above +9%. Property (XPJ) +9.92% and Health (XHJ) +9.88%. Gold Miners (XGD) is a subset of the Materials (XMJ) Sector. XGD up +9.63%.

Information Technology (XIJ) +8.94% almost hit the +9% level.

All other sectors except Energy (XEJ) +0.87% and Utilities (XUJ) -0.77% were above +4% for the four weeks.

It was difficult not to make money in the market in the past four weeks.

Sentiment.

1. AAII INVESTORS SENTIMENT. (American Association of Individual Investors).

Bullish Investors reached a one-year high this week on the AAII Investors Sentiment Poll. Pessimism increased a little but not significantly. Bull/Bear spread remained the same as the previous week at 32%, that's well above the historical figure of 6.5%.

  2. Safe Haven Demand. Bond/Stock Ratio - Australia

Stocks are seen as riskier investments than Government Bonds. If you hold the Bonds to maturity you will get your money back and receive the income from the Bonds for the life of the Bonds. When investors are scared they tend to sell stocks and buy bonds, and vice versa. A rising Bonds/Stocks indicates rising fear. A falling Bonds/Stocks indicates increasing greed and complacency.

The Bonds/Stocks Ratio has reached as low as -25.8 when there is little fear in the market. That's happened on three occasions this year. In each case, the stock market soon reversed from their recent highs.

This week, Bonds/Stocks reached -25.8 again. That indicates a lack of fear in the stock market. If the Stock market follows the previous history, we will see stocks falling, bonds rising, and the Bonds/Stocks Ratio retreating from historical lows. We started to see that on Friday. One day's data point is not a good guide - but this Ratio is worth watching.

% of ASX100 Stocks above Key Moving Averages.

% of ASX Stocks above 200-Day MA. Last week, 58%. This week, 62%.

% of ASX100 Stocks above 50-Day MA. Last week, 76%. This week, 82%.

% of ASX100 Stocks above 10-Day MA. Last week 81%. This week, 77%.

% of ASX100 Stocks showing a rising Hull MA13. Last week 78%. This week 60%. (Hull MA13 is about the same as the 5-Day MA.)

The longer term time periods (>200DMA and >50DMA) have both increased. That's in line with the generally positive Market rise this week. But the two shorter time frames (10DMA and Hull MA13) show the market is rolling over.

Conclusion

The current trend for the ASX200 is up. Stay with the trend until it ends.

The Index is now overbought (see Andrew's Pitchfork) and going into a consolidation pattern (see three sideways Supertrend lines.)

Those conditions require the investor to be wary as we may see reversion to the mean. That can be done through consolidation or a fall.

Good luck - and Merry Xmas.