Weekly Wrap - Week ending 30 September, 2022. XJO Monthly...

Weekly Wrap - Week ending 30 September, 2022.

XJO Monthly Chart.

We are now at the end of the month. September is historically a poor month in the market, and this September hasn't deviated from the trend. XJO down in September, 512.6 points, or -7.34%.

The chart has broken marginally below the 50-Month Moving Average which gave support in June/July. It has finished, however, above the intra-month low of June.

The chart is bearish. On the basis of this chart, longterm investors should stay on the sidelines.

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 be looking for a turn up in Oct. 2022 - a one-year anniversary. Mid-October is often a turning point in down trends.

Weekly Chart.

XJO was down this week -1.53%, continuing the plunge from the two previous weeks. 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.

XJO has found support at the oblique supporting trend line. I had a turn date using WD Gann methods for the 26 Sept. In the short-term that stopped the down-trend, but reversion to the upside hasn't occurred.

The chart remains bearish and XJO on all three time frames (monthly, weekly, daily) remain in sync. Bearish. Any upside is likely to be sold into until we see more optimism in the longer time-frames.

SP500 Daily.

RSI is very oversold at 35.3. Stochastic is in its oversold zone.

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.

This week we again have four sectors below 30 - XTJ, XHJ, XUJ and XPJ. XSJ and XDJ (the big retailers) are just above the 30 level.

This is an exceptionally weak market with poor breadth.

Breadth:

1. New Highs - New Lows Cumulative.

This week saw NH-NL very bearish, four out of five days saw NH-NL greater than -100. The last time we saw a series like this was back in March, 2020, during the bear market of 2020. Readings back then were more extreme than the current ones, so we could have some more extreme readings coming in the near future.

This indicator trends strongly. Only when we see a clear break to the upside, preferably with the 10-DMA above the 20-DMA, should long-term investors be willing to invest new funds.

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 funds.

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 5%, This Week 13%. Any reading under 20 is very weak.

2. % of stocks above 50-Day Moving Average, Last Week 11%, This Week 12%.

3. % of stocks above 200-Day Moving Average, Last Week 19%, This Week 16%. 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. The bear market of 2020 saw multiple readings below 10 - we might have to see similar readings this time.

SENTIMENT.

1. CNN Fear and Greed Barometer.

F&G Index is showing Extreme Fear - it is lower than a week ago. It can go lower. An "extreme fear" reading registers with contrarians that a rebound is likely.

Conclusion.

Markets are very weak. They may have further to go. But don't discount a move to the upside. It is not far off.

Stay safe.