I am posting here on OST for now as we have one more night to go before the changeover to ARI. As the OST forum will be closed and locked down nobody will be able to reply to this post. With that in mind, I will re-post this on ARI come Monday morning, and we can go from there.
Anyway, back to business, I’m bullish, and very much so.
As anyone with a HC nickname must know, we had a major fundamental move in Europe on Friday, and more importantly, the markets loved it. Friday’s action saw the Commodities Index close for the week with a huge move of +5.4%! The US$ got smashed with a -1.37% fall alone Friday night! It left one hell of a red candle. All good for OST/ARI.
Here are some quotes from Redbacka on the XJO forum. I agree with him:
This week, generally, has seen an improvement in markets. There seems no reason why that shouldn’t flow on to Australia. The U.S. is clearly performing the best of the markets I look at. Without a strong performance from the U.S. it seems unlikely that world markets can provide positive returns. The U.S. is on a buy signal. Technically, the German DAX is also positive. It may be a counter trend rally, but at the moment it looks like the beginning of a trend change to the upside. Australia is still within a sideways consolidation. Momentum Indicators on the Weekly Chart have all turned up and are close to giving “perfect” buy signals. (Remember, there’s no such thing as a sure thing on the stock market and bullish conditions can change to bearish very quickly.) China88 remains in a sideways consolidation.
Relative Strength readings on the Materials/Consumer Staples Ratio and SmallOrds/50Leaders Ratio appear to be at “last gasp” levels. This week’s candles on both the Materials and Small Ords were “hammers”. Coming at the low end of a long down trend these often signal the end of the trend. Confirmation with a strong up week next week is needed. If we get that, a multi-week rally is likely. Readings on the Short Positions haven’t improved – but these are lagging readings.
Copper and Crude Oil have also been flirting with important support levels. This week’s action was promising. Both commodities moved up strongly. Both have work to do to prove the end of medium term down trends; but the strong bounce off support is tentatively bullish.
On balance, probabilities favour a multi-week rally. July, in the past 20 years, has been one of the three best performing months of the year. (The others are October and December.) It might be time to consider trades in the most beaten down sectors of the Australian market. For the more conservative, risk averse investor, the Index ETFs might be a better option. That’s a broad strategy. Tactically, the rises in Europe and America were so big in the Friday sessions that those markets migh suffer a bit of indigestion early next week. Don’t be surprised if there’s something of a pull-back early next week.
All of the above is underpinned by a change in sentiment regarding Europe. The pro-growth countries appear to be winning the ideological battle with the pro-austerity countries in the Euro zone. Markets have responded positively to that shift in policy.
I advise going to his post and checking out his charts. He uses slightly different settings than me with his indicators, but they paint pretty much the same picture as mine. And if you’ll excuse me, it also saves me heaps of time posting a link to his great weekly post rather than myself uploading virtually the same charts.
I also feel that this author is on the money with commodities; The CRB Just Formed a Final Three Year Cycle Low. Not sure about a multi-year commodity bull-market as I don’t like to look that far out. I do however agree with his view on the next few weeks and months.
I’ll leave it there for now. I haven’t included some other key charts such as the Vix, CCI and the Euro/US$, however, they are all looking primed for a bullish rise with markets in near general, and more particular with commodities.
