Step Back in Oz Market. Wednesday Evening Liqueurs. 5 August, 2015.
XJO was down moderately today -0.42%. It was a see-saw event today - down, up, down, up. So we have a long lower tail on today's candle which suggests buying pressure - but it was really just part of the see-saw which resulted in the final hour or so going up.
Here's today's chart:
We can see that the current resistance level around 5700 is very important - I've marked with circles where it's been a significant S/R level in the recent past.
At this stage, the XJO is struggling at this level, but not falling significantly. So the battle rages between buyers and sellers, but neither is winning. The previous two times the chart has hit this level, the Index has fallen sharply. So far, this time, that hasn't happened. This suggests that, this time, the bears resolve is not as strong, and, maybe, the bulls resolve is a little stronger than the previous two times.
The battles not over yet. We need to see a significant day, either up or down, to resolve the issue.
I mentioned this morning that CSL had reached a milestone - above $100. But I thought it might struggle for a while. Here's the updated chart:
The negative divergence on the Money Flow Index is not supportive of further upside.
Last night on the ABC, Alan Kohler mentioned Blackmore's. That's usually a death knell for a stock.
Here's the weekly chart:
This looks like a bubble rising into the stratosphere. It is overbought but all sorts of negative divergences are setting up on indices.
Bubbles can continue rising for much longer than any of us think possible. But they all bust sooner or later. The Chinese bubble is the most recent proof of the pudding (bubble).
Would I put money into this at this stage. Nope.
Back in 2011, I touted CSL as a possible. I had no idea that it would more than treble in price. But, four years ago it was a great buy. Now? Dividend Yield is 1.4%. Price to Sales Ratio is a stratospheric 8.45. Below 1 is considered to be value.
So - maybe forward growth estimates could justify a buy recommendation on CSL - but, the above figures suggest it is richly priced at the current time.
Today's market, not unusually, was a two market affair. Materials up. Financials down. Materials +1.1%. Financials -0.6%. This is a simplification, but because Financials is the much bigger sector, our market went down today.
Materials is in a secular bear market - unlikely to change while China struggles.
Financials, although recently weak for a few months, have shown some strength in the recent past. While they remain strong, our market will trend to the upside. Here's the Financials chart:
It doesn't take a genius to see that the XFJ chart is not very different from the XJO chart. As Financials perform, so our broad market index also performs. That's where our fate lies.
(20min delay)