Weekly Wrap - Week ending 15 July, 2022.
XJO Monthly Chart.
We've had just over three weeks so far in July, so we are getting to end of the month.
Both Supertrend Lines remain blue (bearish). 8-Month EMA is headed down. Hull MA13 is headed down.
All indicators are on the bearish side.
The XJO is finding support at the 50-Month MA where it also found support back at the end of 2018.
Weekly Chart.
XJO had a strong week, up +2.81%%. The chart is indecisive.
The index has found support at the 200-Week MA and finished above its 8-Week EMA which is pointing up. HullMA13 has turned positive.
Dynamic RSI14 has given a "buy" signal and Stochastic Momentum Indicator has crossed above its signal line.
All of that is bullish.
On the negative side the chart remains below the two Supertrend lines, which are both flat and parallel indicating a sideways market. MACD remains below the zero line.
Monthly and Weekly Charts are out of sync (Monthly - bearish, Weekly indecisive) so we may be seeing a trend change in the medium term.
Daily Chart.
XJO has broken to the upside of its short-term sideways consolidation. It is now at 6791 which is close to horizontal resistance and resistance of the 50-Day MA.
Hull MA13, two Supertrend lines and 8-Day EMA are all heading to the upside - bullish.
Dynamic Zone RSI14 and Stochastic Momentum Indicator are both now overbought.
The short-term trend is bullish.
For this short-term trend to continue, XJO must rise above horizontal resistance and the 50-Day MA. That could be a tough ask.
SP500 Weekly has broken above its down-sloping bullish wedge. That's a big positive.
Dynamic Zone RSI has given a "buy" signal and the Stochastic Momentum Indicator is also giving a "buy" signal.
Just remember that what works in a bull market doesn't necessarily work in a bear market.
To be confident of a sustained rally, SP500 Weekly needs to be above both Supertend lines.
Sector Changes - past week.
The Weekly XJO chart was up strongly and breadth was good with nine out of eleven sectors showing positive results
Best performers were all cyclicals, Information Technology (XIJ +7.11%), Financials (XXJ +4.39%) and Materials (XMJ +3.72%).
The two negative sectors were both Defensives and only down marginally, Health (XHJ -0.47%) and Consumer Staples (XSJ -0.22%)
Sector Strengths by RSI.
RSI (Relative Strength Index) provides a quick way to compare momentum of sectors. (Click
here for a description of RSI.)
The sectors with the strongest momentum are, Health (XHJ) RSI 65.73, and Information Technology (XIJ) RSI also at 65.73. Three other sectors (XSJ, XDJ and XXJ) are all above RSI 60. So we have a strong, bullish market
As a general rule, its best to follow strong stocks in the strongest sectors.
In XHJ, the two strongest stocks are ANN (RSI 73.52) and RMD (RSI 65.89).
In (XIJ), the two strongest stocks are WTC (RSI 70.92) and CPU (RSI 67.71).
Do your own research on those stocks.
1. New Highs - New Lows Cumulative.
This is one of the important breadth indicators. Unless breadth is solidly positive, the market is always under threat.
NH-NL Cumulative is on the brink of crossing above its 10-Day Moving Average. New Lows have dropped consistently in recent weeks, but we need to see an improvement in New Highs to turn this bullish. Another strong week on the XJO could produce such a result. Continue to watch.
This metric trends very strongly. As such it is a valuable guide to the long-term investor, but not much use to the short-term trader. It gave a timely signal to go long in May 2020, and a sell signal in January 2022. That's a good run for the long-term investor.
If NH-NL Cumulative gives a new buy signal, I'll put that up on my
blog during the week rather than wait for the week-end.
2. ASX Advance-Decline Line.
This is another important indicator of breadth.
The 10-Day MA of ASX Advance-Decline Line has moved moved above the 20-Day MA, which is bullish.
A-D Line tends to react a little faster than NH-NL Cum, so it can be a leading indicator. This may be a harbinger of a strong counter-trend rally. It is also acting better than the last time it was bullish back in March this year.
3. Strong-Weak Stocks Cumulative.
This chart remains bearish but has kicked to the upside. This week was the first week since April that we had a positive result for StrongStocks-WeakStocks. Another good week should switch this to bullish. We shall see.
% of Stocks above key moving averages.
1. % of stocks above 10-Day Moving Average: Last Week 47%, This Week 73%.
2. % of stocks above 50-Day Moving Average, Last Week 32%, This Week 52%.
3. % of stocks above 200-Day Moving Average, Last Week 23%, This Week 25%
These figures suggest that the market is bullish in the short and medium term, but the long-term trend is still bearish.
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 not in sync, one bearish, one indecisive and one bullish. This could be the start of a strong counter-trend rally
2. SP500 Weekly showed a descending wedge which fairly reliably breaks to the upside. It did that this week. It still needs to continue improving to develop a strong counter trend rally.das
3. Breadth according to Advances-Declines is improving but we still have to wait on NH-NL Cum to break to the upside.
4. Health and Information Technology have strongest momentum. Look to strong stocks in those sectors. Do your own research on stocks in those Sectors.
5. The market this week righted its unbalanced nature from the previous week, and, short-term, breadth is good.
6. XJO is facing stiff challenges from horizontal resistance and the 50-Day MA. If XJO can overcome those resistances, we should see a continuation of the current counter-trend rally. The next few days could be crucial.
In America in the coming week, earnings reports will come from Alphabet on Monday, Microsoft and Apple on Tuesday. Those big tech firms could provide catalysts for moving the market up or down.
U.S. Federal Reserve meets 26-27 July - that could also produce a market moving event.
(20min delay)