Weekly Wrap - Week ending 23 September, 2022. Things is Crook...

Weekly Wrap - Week ending 23 September, 2022. Things is Crook in Tullarook.

XJO Monthly Chart.

We have had a little over three week's action in the month of September. Action should only be taken on this chart at the end of the month. The monthly chart does, however, let us see the long term picture for the XJO.

On the chart are two major Moving Averages, 50-Month and 200-Month. The chart is now sitting on the 50-Month Moving Average. That has recently provided support and again back in 2018, so it is an important dynamic support level. It could well support the XJO again. A more pessimistic view is the 200-Month Moving Average.

Both Supertrend Lines remain blue (bearish). The chart remains below the 8-Month EMA which is heading downward, i.e. bearish. Hull MA13 is headed down - bearish. Hull MA13 is the most sensitive of these. It turned down first in Oct. 2021. We'll we looking for a turn up in Oct. 2022 - a one-year anniversary. Mid-October is often a turning point in down trends.

Currently this chart remains bearish with the possibility of a turn to the upside.

Weekly Chart.

XJO was down this week, -2.43%, continuing the plunge from the previous week. The chart remains bearish. The chart closed just below the 200-Week MA where it found support in late June.

XJO found resistance at the 50-Week MA. Those two MAs 50-Week and 200-Week appear to be important dynamic support/resistance areas. Further down side could see the market test the low of March, 2020.

Two Supertrend lines are blue - bearish. Hull MA13 is headed down - bearish.

The Weekly Chart is in sync with the Monthly Chart - both Bearish.

Daily Chart.

XJO remains in a bearish down trend. Daily, weekly and monthly are in sync - bearish.

Looking at the tea-leaves provides some hope of a rebound. The XJO is oversold with an RSI at 34.58. Stochastic is in its oversold zone. MACD Histogram is headed up.

XJO has formed a descending broadening wedge - which is bullish. The chart has a little way to go before reaching the lower edge of the wedge. Expect a rebound when the lower edge is touched. If the chart rebounds through the top edge, we may have seen the last of this down trend which began when XJO was rejected at the 200-Day MA back in late August.

SP500 Daily.

SP500 finished the week sharply down -1.72%, but the lower tail of the candle shows some evidence of intra-day buying.

RSI is extremely oversold at 28.9. Stochastic is in its oversold zone.

Not shown on the above chart are volume statistics. But volume has been increasing steadily this week which suggests weak hands (retail investors) may be throwing in their holdings which are being transferred to strong hands (institutional investors).

At this stage, a move to the upside is speculative - but it should not be discounted.

Sector Strengths by RSI.

RSI (Relative Strength Index) is calculated using the default setting of 14 days - almost three weeks of trading. It provides a more reliable guide to changes in sectors than the one-week results which can jerk around quite a lot and, thus, RSI is probably a more reliable guide to recent strength in the sectors. (Click here for a description of RSI.)

Eleven of eleven sectors have readings below 50. 50 is often regarded as dividing line between bullish and bearish. With all sectors below 50, we have a very bearish market with weak breadth.

The best two sectors are the resources, XEJ and XMJ.

Four sectors are below 30 - extremely oversold - XTJ, XHJ, XJU, XPJ. Two are just above 30 - the two big retail sectors, XSJ and XDJ.

Breadth:

1. New Highs - New Lows Cumulative.

Friday saw NH-NL very bearish. NHs stood at 8, NLs stood at 128. That's the first time that NLs above 100. Consequently, NH-NL Cumulative has plunged down from its 10-Day Moving Average While NH-NL Cum remains below its 10-Day MA, long term investors should remain cautious.

This indicator trends strongly. Only when we see a clear break to the upside, should long-term investors be willing to invest new funs.

2. Strong Stocks - Weak Stocks Cumulative.

This is a metric of my own making. All stocks on the ASX100 are rated on seven criteria. Stocks positive on all seven criteria are rated "Strong". All stocks negative on all seven criteria are rated "Weak".

This indicator trends strongly. Only when we see a clear break to the upside, should long-term investors be willing to invest new funs.

2. Strong Stocks - Weak Stocks Cumulative.

This is a metric of my own making. All stocks on the ASX100 are rated on seven criteria. Stocks positive on all seven criteria are rated "Strong". All stocks negative on all seven criteria are rated "Weak".

This week we had 2 strong stocks and 24weak stocks. That's very poor breadth for this metric.

Cumulatively:

This chart remains below its Five-Week MA, which is a bearish reading. This is a reasonable guide for medium term traders.

% of Stocks above key moving averages.

1. % of stocks above 10-Day Moving Average: Last Week 13%, This Week 5%. That's the worst reading since 28/1/22, which marked the end of the Jan. 22 fall.

2. % of stocks above 50-Day Moving Average, Last Week 25%, This Week 11%. That's the worst reading since April 2020 - when XJO was coming out of the Mar. 2020 bear market.

3. % of stocks above 200-Day Moving Average, Last Week 25%, This Week 19%. That's the worst reading since May, 2020.

Momentum is now nearly as bad as we saw at the end of the 2020 bear market. We can't be far off an end to this down trend. At worst, one more month of bearish sentiment should see a turn-around. It could come sooner than that.

SENTIMENT.

1. Australian Consumer Confidence.

Consumer Sentiment has been falling since October, 2021, but pulled up a little in August. This tends to be a leading indicator for the stock market. It is currently a little above the lows back in 2020. So this may be suggesting that the stock market is close to its lows.

2. CNN Fear and Greed Barometer.

F&G Index is showing Extreme Fear - it can go lower, but it suggests the market is close to a low.

3. Put/Call Ratio.

The Put/Call Ratio is now higher than at any time this year. And higher (not shown) any time since the end of the 2020 Bear Market.

Conclusion.

This is Crook - that's for sure. Can it get any worse? Yes, but not much. Contrarians will be looking to buy this market.

Maybe it's time to ratchet down the pessimism, and look to a brighter future. It is not far off.

Stay safe.