Weekly Wrap - Week ending 2 September, 2022.XJO Monthly...

Weekly Wrap - Week ending 2 September, 2022.

XJO Monthly Chart.

We have only had a couple of days action in the new month of September. The monthly chart does, however let us see the broad picture for the XJO.

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.

The XJO found support at the 50-Month EMA where it also found support back at the end of 2018. The chart seems likely to head down for another test of the 50-MEMA.

In the very very long-term, XJO found support after its bear market of 2020 at the 200-Month EMA. That looks like the support which might avoid a catastrophic fall for the XJO.

Weekly Chart.

The past five trading days for the XJO were poor with the Index down, -3.87%. The chart is clearly bearish and has now turned down after five weeks of counter-trend rally.

XJO found resistance at the 50-Week MA. Two Supertrend lines have turned blue - bearish. Hull MA13 has turned down - bearish.

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

Daily Chart.

Hull MA13, two Supertrend lines and 8-Day EMA are all heading to the downside - bearish.

All three charts, Monthly, Weekly and Daily, are in sync - bearish. Expect more downside until we see clear changes in trends.

SP500 Daily.

SP500 daily chart is bearish. On Friday, it attempted to rebound, opening on the high side, but overhead resistance of the 50-Day MA, 8-Day EMA and two Supertrend Lines proved too much for the SP500. It finished well down on Friday, -1.07%

We can expect that to follow through to our market on Monday.

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.)

Nine of eleven sectors have readings below 50 - that is a sign of bearishness and weak breadth.

The two sectors with RSIs above 50 are Energy (XEJ, RSI 53.7) and Health (XHJ, RSI 51.23). The worst performing sector was Materials (XMJ, RSI 34.46). XMJ is now oversold.

Breadth:

1. New Highs - New Lows

This week New Highs average 16.4 on a daily basis. New Lows averaged 31. That's almost a ratio of 1:2 in favour of New Lows. Not a good look. Another sign of just how bearish our market has been this week.

2. Strong Stocks - Weak Stocks Cumulative.

This is a metric of my own making. All stocks on the ASX100 are rating 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 four strong stocks and 16 weak stocks.

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 48%, This Week 21%.

2. % of stocks above 50-Day Moving Average, Last Week 64%, This Week 21%.

3. % of stocks above 200-Day Moving Average, Last Week 38%, This Week 31%

Momentum on all three metrics slowed quickly this week. They are getting close to the oversold position where we see numbers below 20%. Any more falls in the coming week and contrarians will be looking for a rebound in the XJO.

I'd like to see all of these above 50% to feel comfortable about the longer term bull market.

Conclusion.

1. Monthly, Weekly and Daily Charts are in sync, all bearish

2. Breadth has been poor, but the market could be getting down to a level where we will see a rebound.

3. XHJ and XEJ have strongest momentum. Look to strong stocks in those sectors. Do your own research on stocks in those Sectors.

4. Historically, September is the worst month of the year, so any rebound will probably be sold into.

5. RBA makes another interest rate decision this week. Watch how the market goes after that decision is handed down on Tuesday at 2.30 p.m. The current RBA Rate is 1.85%. The market is expecting a rise of 0.5% to 2.35%.

Stay safe.