Comment: A solid reversal day up with excellent breadth (Russell2000 +6.42%). Volume was high – the highest for nine days. At the top of a trend that’s a negative – at the bottom of a trend that’s a positive. At 10 a.m. (New York), the market looked cactus – with the Dow Industrials down near 10400 – well below major support/resistance at 10700. At 10 a.m. there was a high volume negative bar which signalled the end of the down move. The market then see-sawed to make a broad W formation with a stunning last 45 minute rally to finish well above major support/resistance at 10700.
NewHighs/NewLows 11/1198. That’s close enough to the worst multi-month figures back in early August of 3/1292 to consider today a washout of the weak hands. A tradable rally should now ensue.
The Materials Sector +3.89% and Energy Sector 3.27%. Those figures are strong and positive for the Australian market on Wednesday. Eight of nine S&P Sectors were up with Utilities the only sector, down -0.49%. The Financials Sector was the best, +3.99. The Banking Index was strong, +4.52%. Semi-conductors up, +4.25%.
At the time of writing, I can’t access an updated Copper chart. But Copper was up +3.47%. It opened the day way down and had an intra-day move up of around 8%. Another indication that the down trend has ended.
Europe: France -2.61% Germany -2.98% London -2.58%
World asset markets tend to be highly correlated. The weakness in the Europeans is indicative of the weakness of the U.S. market in the middle of the days trading.
Gold in U.S. Dollars is down -2.21%. Gold in Oz Dollars is down -2.52%. AUD/USD down, -2.28% to finish at 94.08. The Ozzie is below major support of 95. That could take a little off any rise in the Ozzie stock market today. But – you never, never know. It could be seen as a plus for our export industries. EWA (the ETF for Australian shares) up +2.27%.
Technical Comment on the Dow Industrilas: The DJIA finished at 10808.7. Above major support/resistance around 10700. Below the 8-Day MA. Negative. Below the 34-Day MA. Negative. Indicators: Stochastic: 24.9. Below its signal line. Negative The 8-Day MA is below the 34-Day MA. Negative The 13-Day MA is below the 150-Day MA. Long-term negative. RSI.9 is at 41.8. Needs to get back above 50. MACD Histogram marginally below Zero. Neutral. MACD (zero lag) marginally below zero. Neutral. CCI.9: -147.8. Oversold.
Momentum indicators tend to lag the market. Positive readings should come in the next couple of days if my reading of recent action (not just today) is correct.
We now have to see if this is just a counter-trend rally or the real deal. A break above the channel marked on the chart would be a great medium term signal. I still want to see a positive 8/34 MA x-over before I’m completely convinced.
Long term, the market needs to get above resistance at around 11700.
Remain cautious.
For a completely cynical rant about the markets, American policy, rumours, etc., I’d suggest you read the always entertaining Shanky: http://shankystechblog.blogspot.com/2011/10/blog-post.html
To get some flavour for what you’re in for – here’s his disclaimer:
"You are a complete bonehead if you take and act on any of the advice given on this blog. You need to have your head examined if you solely rely on others telling you what to do and do not do your own homework. This is fun for me and should not be construed as investment advice. If you think it is, DON’T! Enjoy!"
(20min delay)