Indices 24/6, page-50

Weekly Wrap. Week ended 28/6/24

ASX was relatively unchanged this week - down a little with the XJO -0.37%.

The 50-Day MA and the 20-Day MA are, more or less, sliding sideways, i.e., no trend.

MACD Histogram shows lower highs and higher lows - tightened up into a coil. The histogram is currently flat at its zero line. Again - no trend.

Detrended Price Oscillator is similarly mired at its zero line - no trend.

Sideways trends like this invariably move into volatile trends - either up or down. The past two days show long wicks on the daily candles, giving a taste of the volatility that could be coming.

July tends to be a positive month for the XJO - the past eleven years have shown that July has been positive every year. That regularity in the seasonals suggests that the trend will break to the upside.

America - Dow Jones

Dow Jones, which has recently been closely correlated to the ASX, was down this week -0.08% - static.

On Friday, after new Inflation figures were released, Dow Jones had a wide-range day, but finished virtually unchanged, down just -0.12%.

The 20-Day and 50-Day MAs are locked together. On the chart above, the blue 50-Day MA completely obsures the 20-Day MA which is the mid-line of the Bollinger Bands.

Since 1928, July has been the best month of the year for the Dow Jones.

The inflation data (CPE) came in better than expected: On a three-month average, the core PCE is now running 2.7% annualized--down sharply from the 3.5% pace we saw in April, and 4.5% in March. ( https://www.cnbc.com/2024/06/28/kelly-evans-the-debate-is-over.html)

I'm a bit surprised the reaction in the Dow Jones wasn't better than the flat finish. The other major indices were much worse, SP500 was down -0.41% and Nasdaq -0.71%.

ASX Sector Performance.

There were three Positive sectors: Info Tech +2.67%, Energy +0.93% and Financials up a little, +0.16%.

The inflation data in Australia, unlike in the U.S., was poor this week. That hit the Property Sector hard, -3.53% and the Discretionary Sector -1.29%

Here's a column graph of the Sectors grouped into Cyclical, Sensitive and Defensive:

The Defensive Group, although down were relatively unaffected this week.

The group most affected was the Cyclical group and we can see just how poorly Property performed.

Info. Technology was a great performance - which may appear anomalous, as the XIJ sector consists largely of growth stocks which tend to be interest rate sensitive. That result was largely driven by Wisetech, up +7.48% this week. For more on Wisetech's fundamentals, read here.

Energy

XEJ gave a "buy" signal on Tuesday when the MACD Histogram turned positive. That was supported by a positive divergence on CCI which often gives good leading signals.

Friday, however, finished with "shooting star" candle which is shor-term bearish.

I'd like to see XEJ break above the 50-Day MA and the down-trend arrow on the chart before thinking that the current long-term down-trend has finished

Long Term Investor Index for the ASX.

My long term Investor Index 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.

It did take a hit on Thursday when NH-NL was negative for the first time since 30 May. 30 May was a one off. On Friday, NH-NL returned to positive, but it does show that the NH-NL Cumulative is currently vulnerable if the market does have a couple more significantly negative days.

Conclusion.

The Australian market is currently in a sideways trend. NH-NL Cumulative remains bullish for the long-term investor.

July tends to be seasonally positive both in Australia and the U.S. Seasonality is a tool and not necessarily predictive.

Watch which way the chart moves this week, as it will probably tell us if July this year will again be positive.

August, September and October tend to be poor months for the Australian market. So, if July is positive, don't get too cocky.

Good luck.