Oh Dear, only three posts after I posted at 11.16 - and mine wasn't even market related, just a bit of banter.
Exciting day today, too.
In Australia today:
Twenty Leaders +0.8% 50 Leaders +0.7% XJO +0.8% XAO (All Ords) +0.7% Small Ordinaries +0.8% Financials (ex Property Trusts) +1% Materials -0.2% Consumer Staples +1.6% Energy +0.9% Health +0.5% Telecoms +1.1% Consumer Discretionary +1.7% Comment: A strong day on heavy volume. 20-Day Relative Volume was 130%. That’s extremely high. We’ve also had a run of six days when the gross volume was in excess of 1Billion shares traded on the All Ordinaries. We have to go back to late March, early April 2012 to get such a run of high volume days. It took until the end of April for the market to actually turn down. “Herding” behaviour tends to appear at the top and bottom of trends. That is what seems to be occurring now. That doesn’t mean a change in trend is imminent but indicates excessive bullishness on the part of investors.
Today’s final candle hides an up/down/up day. The market was up solidly (+0.9%) until early after noon. After the release of “Flash PMI” figures by HSBC, the market gave up about half that gain. Then in late afternoon trade had another surge up. Materials was particularly volatile today. Down about -0.7% early, it then turned up to be up +0.7%, then turned down, then up, then down a bit. It finished down marginally. The big turn down from noon till almost 3.00 was extreme but not as great as the early morning surge.
Financials were again very strong. More on them later.
Technical Comment on the XJO: The XJO finished at 5055.8. Old support/resistance: 4981.43. Above support. But still not reclaiming all of Thursday’s big fall. Indicators RSI9: 63.4. In a zone where reversals can occur (if we’re in a bear market). MACD Histogram. Below zero. Negative. MACD: Barely above zero. Neutral. Stochastic: 62.2. Below its signal line and falling. Negative. CCI: +58.9. Needs to fall below zero to confirm a sell signal. ADX: 59.1. Below its signal line. Negative. Probably needs to fall below 40 to signal a change in trend.
At this stage, horizontal and oblique support hold. So the up trend is intact.
Financials (ex-Property) recently had an RSI reading of 91. That’s the highest reading of an S&P Sector. I think we can rightly claim, therefor, that it has been the leader of this remarkable bull market. So if this market is to fail, we’d expect to see signs of that in the leading sector. Here’s the chart:
There’s no clear sign yet that the up trend is changing to the down side, despite the extreme indicator readings. We might need to see Momentum (bottom pane) fall below zero to feel confident about a trend change to the downside.
Tom McClellan (http://www.mcoscillator.com), son of the famous inventors of the the McClellan Oscillator (NYMO) and who carries on their work, suggests that the stock market moves in nine-months cycles. Such cycles are fickle things. He wrote an article in July 2011 titled “Where did the nine-month cycle go?” I take cycle theory with a grain of salt, but it sometimes works.
We’re coming up to about nine months since the market turned in early June, 2012. It didn’t have a significant correction until mid-October, 2012. That’s about 4 1/2 months since the turn date – half a nine-month cycle. But that didn’t really deter the long term up trend.
I thought that that was worth a mention. Keep an eye out for weakness in the Financials (ex-Property) in the next couple of weeks or so.
(20min delay)