Indices 20/5, page-56

Daily Chart - XJO

XJO strongly on Friday +0.96%. Friday was a Bullish Engulfing Candle suggesting the end of the current down trend. The length of the current down trend occurring in the second half of May is about equal to the down trend seen in the middle of April.

Friday's big upside move pre-empted a similar move in the U.S. on Friday night.

After Friday's rebound, XJO was down only -0.34% for the week.

Daily Chart for IOZ.

IOZ is a tracking ETF for the XJO. It provides some additional information not given by the XJO Chart - Volume. There's not a high correlation between volume on IOZ and the XJO, but over time, is good enough to give some idea of what's been happening.

On the above chart, we have a Point of Control in line, mor or less, with the recent high in mid-May. POC is the level on the chart where the most volume has occurred. Using the range in late April (arrowed), that gives a rise from the level on Thursday up to the recent high and the Point of Control. That seems a reasonable target to set for this rebound.

American Market.

Friday was a dramatic day on the American market with a huge intra-day reversal on heavy volume. That, no doubt, set up the market for a rise to new all time highs.

The SP500 and, more clearly, the Nasdaq have not fallen as much as the Australian market because of the over-weight of Tech stocks on the SP500 and Nasdaq. Australia doesn't have the same sort of weighting to Tech stocks - how market is skewed more by Miners and big banks.

Sector Performance this week.

The two best performing sectors in Australia this week were Staples +1.02% and Discretionary +0.83%. (XGD, the brest performer in the above graph isn't a sector but a sub-set of the Materials Index).

Staples and Discretionary include the big retailers in Australia like Woolworths, Coles, JB HI Fi and Harvery Norman. That indicates that the market thinks consumers will be loosening their belts in the near future probably due to a fall in interest rates. We shall see.

Daily Chart for Woolworths.

Woolworths was up +2% on Friday on heavy volume. That was its heaviest volume since its big fall back on May 2. More upside in Woolworths seems likely.

20 Leaders

The 20 Leaders in the Australian market make up more than 50% of the ASX. 20 Leaders include the big miners and the four big banks. What happens in the 20 Leaders has a big effect on the broad market indices.

Here below is the performance of individual stocks in the 20 Leaders over the past week.

The best performer was XRO +2.9%. Xero is in the Technology Sector. The next two best performers were from Discretionary (WES +1.68%) and Staples (WOW +1.67%). (I highlighted Discretionary and Staples above)

XRO is often quoted as a potential take-over target and held up very well in the recent sell-off. I noted that it was a potential "reversion-to-the-mean" stock last week. Well it did come off a little but nowhere near enough to threaten the 20-Day MA.

Fortescue (FMG) -7.5% was the worst performer after a down-grade from Bell Potter. Factors influencing Bell Potter's down-grade of FMG were probably a factor also in the performance of Rio -2.67%.

A big discrepancy exists between the performance of ANZ +0.5% and CBA +0.56% and Westpac -2.18%. The market seens to have taken a dislike to WBC compared to ANZ and CBA. NAB also missed -0.15% but that's only a marginal drop.

Long-Term Investment Indicator

My Long-Term Investor Indicator is based on New Highs minus New Lows Cumulative. While the NH-NL CUM line remains above its 10-Day MA, the Long-Term Investor can maintain their bullish positions.

NH-NL did have a negative day this week - if we get a few more - this metric will go bearish.

Conclusion.

The Australian and American markets appear primed to go higher over the next week of so.

I'm expecting that the current ranging market will continue throughout our winter months (America's summer). That was a thesis I voiced some weeks ago.

Nothing much has changed to my opinion since then. There'll be ups and downs, but in the long-run not much happening. But keep an eye on the Nh-Nl Cumulative chart. If something dramatic happens there I'll put it up on my blog in the daily reviews.

If I had to pick one stock amonst the blue chips, What would it be? Probably XRO.

https://wordpress.com/post/australianmarketreport.wordpress.com/23363

Good luck.