22/01 Indices, page-44

Almost to the end of January. Stock Market Guru says: As goes January, so goes the year.

Burton Malkiel, Princeton University economics professor, says that's all bollocks. The stock market is a Random Walk and those adages from Wall Street should be taken with a dose of Epsom's.

Others, e.g. Michelle Schneider from Market Gauge, swears by the first half range of January as a good guide. Whichever way the range breaks - will decide, more or less, which way the market will go in the first half of the year.

XJO

Let's have a look at that suggestion for the XJO. (Mish Schneider, of course, lives in the U.S. so her idea may only have application to the U.S. market.)

The high for January was set at the beginning of the month - 7633. The low came on the 18 January - 7322. Those then provide us with benchmarks for the next six months. If the chart breaks above 7633 we'll be bullish. If it breaks below 7322, we'll be bearish. Let's see how it goes.

All the indicators are heading up, so the chart looks likely to test the top of the range - 7633.

Here's a daily chart for XJO with an Andrew's Pitchfork superimposed.

According to Andrew's Pitchfork theory, the mediam line of the Pitchfork is likely to provide resistance. And, the median line is more or less around the Resistance Line of the January range. That looks like an important level.

If the chart gaps up above the Median Line - then further upside can be expected.

The next week could be an interesting time - as a predictor of what will happen later in the year.

SP500

Looking at the American market - it has already broken to the upside from the rectangle encompassing the first half of January. Looks bullish for SP500 for the first half of the year.

Notice that SP500 is keeping below the Median Line of the Pitchfork. So we can expect the SP500 to continue on in a channel marked by the Median Line and the lower dotted line of the Pitchfork.

All bets are off, however, if the SP500 gaps above the Median Line or breaks below the lower support line of the Pitchfork.

What's been happening this week and this month in the Sectors.

1. Sector Changes this Week

XJO was up +1.81% this week and all but one Sector were up. Best was Materials (XMJ) +3.15%. Financials (XXJ) was the next best performing Sector, up +1.75%. XXJ amd XMJ are the two juggernauts of the ASX - if the do well, the market does well.

Gold (XGD), which is an Industry sub-sector of Materials (XMJ) also had a good week, +2.01%.

The only loser was Utilities -0.24%.

The only Sector gaining less than 1% was Discretionary (XDJ) up +0.51%. Its under-performance was largely due to a big fall in Domino's Pizza, down on Friday -31.05%. Ouch!

  
2. Sector Changes this month.

Comparing the Weekly Change with the 4-Weekly Change, we can see that something dramatic has happened in the past week. Materials (XMJ) shows a loss of -5.45% for the four-weeks, but a gain of +3.15% in the past week.

Looking at a weekly chart for BHP (the biggest stock in XMJ), we can see a bullish change.

This week's candle is a bullish engulfing candle - which suggests more upside. The 20-Week MA is above the 50-Week MA - a Silver Cross. It looks like the big Miners are back in favour. We still have to see a major change in the shell-shocked Lithium Miners - but action there is beginning to look promising.

Long-Term Trend.

Cumulative New Highs minus New Lows provides a handy guide to the long term trend for long term investors. It is currently headed up and above its
10-Day MA - bullish. Stay with the trend.

Conclusion.

This week I've presented a relatively positive view of the ASX - it remains bullish. We need to watch when/if it breaks the 1st Half January range - which may provide a clue to be bullish/bearish prospects for the 1st Half of the Year.

Miners appear to be making a comeback after being in the dog-house. They're worth a look.

Good luck.