Weekly Wrap. Week ended14 June, 2024ASX was weaker this week...

Weekly Wrap. Week ended14 June, 2024

ASX was weaker this week with the XJO down -1.73%.

Below is a chart for IOZ, a tracking ETF for XJO

IOZ is more or less at an equilibrium point. It is sitting in the Neutral Zone, One Standard Deviation +- from the 20-Day MA.

Apart from the Force Index, which is negative, other indicators in the lower panels are about at their mid-lines or zero lines.

The Point of Control on the Volume Profile is at the top of the recent range. I'd expect that to again put a cap on upside movements. The bottom of the Value Zone, where most volume has occurred is at 31. IOZ finished at 31.23, so there's not much room for downside movement before a big slide to the downside could be expected.

I'd wait and see how this plays out. RBA gives an interest rate up-date on Tuesday 18 June at 2.30 p.m. That might result in a definite move.

Chart for MVW

MVW is an equal weighted ETF covering a wide range of stocks on the ASX. That's different from IOZ which tracks the XJO 200 Accumulation Index and is cap-weighted. In a cap-weighted index the biggest stocks by capitalization carry more weight than smaller stocks with lower capitalisation. The ASX 20 Leaders, for example, which is cap-weighted, carries a weight of about 50% in the XJO, while the other 180 stocks take up the rest of the XJO on a sliding scale.

So - why should we look at the Equal Weight ETF. This tells us if the results in the XJO are skewed by the performance of the larger stocks in the Index. MVW provides a guide to breadth in the market. If breadth is poor, then the overall market is prone to a big drop if some of the bigger stocks take a hit, for whatever reason.

Comparing MVW to IOZ we can see that MVW is weaker than IOZ. The chart lies in the bearish zones of the Bollinger Bands while IOZ is in the Neutral Zone.

Indicators in the lower panels are well below their mid-lines or zero lines - again much weaker than IOZ.

The conclusion is that breadth is relatively poor and the XJO will be prone to a hit to some of the bigger stocks in the XJO.

Sector Performance this week.

Nine of Eleven Sectors were down this week. (XGD was also down - it is a sub-section of Materials XMJ).

The best performers were Discretionary +0.36% and Info. Tech +0.14%. Those results are little to be excited about,

Worst Performer was Materials XMJ -4.28%. XMJ is the second biggest sector in the ASX. The biggest is Financials XXJ, down -1.12%.

Dow Jones.

XJO has a reasonably close correlation to the Dow Jones, better than the SP500 and Nasdaq which are both skewed by the outstanding performance recently by a few big Tech stocks.

Like the XJO, DJI is sitting in its Neutral Zone of the Bollinger Bands.

It has had difficulty rising above its 20-Day MA which has recently acted as resistance.

On the other hand, three of the past four days show candles with long lower tails, which indicates intra-day buying. On that basis I'd think that DJI has a good chance of breaking above its 20-Day MA and sustaining a reasonable rally. That's a big "if". Wait and see if it can break above its 20-Day MA - which could spill over to the Australian market and produce a rally.

I'll remain in wait-and-see mode.

Long Term Trend Finder.

My long term trend finder is based on New Highs minus New Lows cumulative. This is something for long-term investors. While NH-NL Cumulative remains above its 10-day MA, that's a message for the long-term investor to hold.

NH-NL Cum remains above its 10-Day MA - that's a positive for the long-term investor with a broadly based portfolio.

Conclusion.

The ASX is currently more or less in equilibrium - it could go either way. I'd watch for the Dow Jones to break above its 20-Day MA which might spill over to provide direction for the XJO.

Currently NH-NL Cumulative remains bullish - but that could change quickly.

Breadth in the ASX as measured by the MVW has weakened which may be a precursor to a move to the down-side.

Good luck.

Note. This blog is a way for me to clarify and chronicle my thinking about the Australian market. As such it is pertinent to my personal situation but may not be pertinent to yours. Treat the information in this blog with some skepticism and I would urge you to do your own research.