Weekly Wrap. Week ended 15/3/24Friday was an extra-ordinary day...

Weekly Wrap. Week ended 15/3/24

Friday was an extra-ordinary day on the ASX. XJO had a wide range day of 1.61% but only finished down -0.56%, i.e., it recovered about 1% of the day's losses after bouncing off its low for the day. Financials Index (XXJ) was even more dramatic. XXJ had a range of 1.96% but only fell -0.15%, i.e., it was up about +1.8% off its low.

But, as they say on TV ads, there's more. Volumes were also extra-ordinary. Eleven of the 20 largest stocks on the ASX (20 Leaders), recorded their biggest volumes traded in the past 50 days. Eight of the 20 Leaders recorded eitheir their 2nd or third biggest volumes in the past 50 days. Only one stock (WTC) didn't record a significantly big volume on Friday.

But ... there's more. Volumes on nine of the 11 biggest volumes were 3 Standard Deviation Events. That means that only about 0.3% of events occur as 3 Standard Deviation Events, i.e., about once every 300 days - or once a year.

But ... there's more. Volumes on two of the 11 biggest volumes were 4 Standard Deviation Events. That means that only about once in a 1000 days do we see volumes like that - or about once every three years. The two stocks in that category were Goodman (GMG) and Rea (REA).

The nine stocks with 3 Standard Deviation Events were: ANZ, Aristocrat, BHP, CBA, FMG, NAB, QBE, Rio and Westpac.

Now - anything can happen on the stock market. And does. But - those statistics suggest you can buy most stocks now with a fair degree of certainty that they will go up.

I'll give you two contrasted examples - both coal miners. WHC and NHC.

Chart for NHC:

Heavy volume came into NHC on Friday (4 Standard Deviation from its mean). That occurred at the Point of Control and a major horizontal support level. That's a strong "buy" signal.

Chart for WHC.

Nothing similar to NHC occurred in WHC. Volume was just a little better than its 20-Day Average but nothing significant. (WHC is, however, very oversold - so it is likely to bounce here.)

So the Big Bucks Boys (Smart Money) were selective in what they bought, e.g. New Hope (NHC) but nowhere near significant buying in Whitehaven (WHC).

And that suggests you should be too., i.e., selective. Do your own research.

XJODaily Chart

This week XJO finished at 7670.3 down -2.25%. It appears to have completed an ABC pull-back, bouncing on Friday strongly off the 50-Day MA. Given the strong volumes coming into many stocks, that suggests more upside.

What's been happening this week in the Australian Sectors?

  Sector Changes this Week.

Only two sectors were up this week, XUJ +1.21% and XPJ +0.77%.

The two worst sectors were the Big Bombolas, Financials -3.37% and Materials -3.36%. Together those two make up around 50% of the Australian market.

No wonder XJO was down -2.25% for the week.

The big volumes seen going into the four big banks (CBA, ANZ, NAB, WBC) and the three big miners (BHP, RIO, FMG) suggest we will see a turn-around in those two sectors (XXJ, XMJ) in the coming week.

Gold Chart

Before this week, Gold had a strong up move on high volume - reaching a new all time high.

This week, the chart has settled back a little but volumes have steadily decreased the past three days suggesting that the selling (profit taking) is close to being over.

Look for more upside in Gold and Gold Stocks.

Long-Term Trend.

Cumulative New Highs minus New Lows provides a handy guide to the long term trend for long term investors. It is currently headed up and above its 10-Day MA - bullish. Stay with the trend.

Conclusion.

Friday appears to have been a terminal day for the ABC pull-back in the XJO.

Volume studies have confirmed a return to confidence in the market on Friday.

As always, do your own research, and be selective in your investment/trading decisions.

Good luck.
RB