Plenty of noise being made in the media this week about new...

Plenty of noise being made in the media this week about new records for SP500 and Nasdaq. Nasdaq best since 2021. Not much mention, however, about the Dow Jones which fell this week by -0.15%.

The original Dow Theory from over 100 years ago was based on the Dow Jones Industrial Average and the Dow Jones Transport Average. According to Dow Theory - the Indices must confirm each other, if one broke to a new high, it would only be confirmed if the other broke to a new high.

Modern views on Dow Theory suggest that the Transport Index is no longer as important as it was. Analysts now focus on the three major indices, Dow Jones, SP500 and Nasdaq, i.e., a new high is only confirmed if all three make new highs. The SP500 and Nasdaq broke to new highs this week, but Dow Jones fell. So, no confirmation.

Using the "old" Dow Theory - Dow Jones Industrial Average made an all time high on 23 February - that was not confirmed by the Dow Jones Transport Average. No confirmation.

Australia did go on to a new all time high in the past week and broke upwards from a month long consolidation. XJO up this week +1.33%.

 XJOWeekly Chart

XJO finished at 7745.6. That break-out to a new all time high has ignited a lot of optimism on the part of investors.

Negative divergences on CCI and MACD Histogram are urging investors to be cautious.

For the month of February, XJO was up just +0.23%. February and March tend to be seasonally weaker than prior months like November, December and
January. Although positive, February was hardly strong. The seasonal tendency for March is another reason to be cautious.

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

1. Sector Changes last Four Weeks

Seven sectors up, four sectors down. That's an improvement on the previous week when we had six sectors up. The improver was Staples (XSJ) up 2.22% for the past four weeks.

Best three were XIJ (Information Technology) +19.51%, XDJ (Discretionary) +8.09% and XXJ (Financials) +3.86% . Cyclical or Sensitive groups which suggests there is still plenty of confidence in this market. They are interest rate sensitive - and, although interest rates haven't fallen, the market is forward looking and expect a fall in interest rates to drop later in the year.

Worst performers were XMJ (Materials) -3.92%, XEJ (Energy) -6.4% and XHJ (Health). XMJ and XEJ are the two resources sectors which depend to a large degree on the Chinese economy which is facing deflationary pressures. XHJ has taken a breather after being very strong for many weeks.

  2. Sector Changes this Week.

It's worth comparing Four Week figures to One Week figures as this can pick up on improvers and back sliders.

Of significance Is XIJ up 7.94% - thus retaining its leadership status in the market..

Big changes have occurred, however, in XMJ (Materials) +3.46% and GDX (Gold Miners) +4.87%. (You may remember that I called Gold Miners as my "roughie of the week" just two weeks ago. I was out on my timing by a week. This week has been great for the Gold Miners and looks likely to continue with
Gold up +2.01% on Friday night in the U.S.)

GDX Chart

GDX (Gold Miners) had a big jump in Australia on Friday, up +2.09%. That may have been pre-empting the U.S. Friday night move to some extent, but we should see more flow on to Australia on Monday.

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.

Momentum - Daily and Weekly RSIs.

Comparing Weekly with Daily RSIs is a quick way to see where momentum may be increasing or decreasing.

Increases: XMJ, XDJ, XIJ, XEJ, XSJ, XUJ, XNJ, XGD.

Decreases: XXJ, XTJ, XHJ, XPJ, XJO, IAF.

Decreases are not necessarily a negative. Only if the Daily RSI is below 50 and Daily RSI is below Weekly RSI is it a problem. Sectors in that category are XTJ, XHJ,

Which ever way I measure it, XIJ is the standout sector based on performance and momentum.

Conclusion.

The trend in the broad market is up - stay with the trend.

But, as always, be selective, not all stocks/sectors are created equal. XMJ, XGD and XSJ look to be improvers. XIJ remains the standout sector. Be cautious with XTJ and XHJ.

Good luck.