redback report week ended 1/4/2011

CONTENTS

Indices: One-Week Performance.
XJO - Monthly Chart (for the long-term investor)
XJO - Weekly Chart
XJO - Weekly Chart - very long term view.
XJO - Daily Chart
Small Ordinaries - Daily Chart
Gold in Oz Dollars - Daily Chart
Ozzie Dollars - Daily Chart
Dow Industrials - Daily Chart
EWA - Australian Shares - NYSE
Daily Copper Chart
Summary and Conclusion
Words of Thanks

INDICES ONE-WEEK PERFORMANCE

XAO: +3.35%
All ten S&P Sectors were up.
Best (both defensives):
Telecoms +5.6%;
Health +5.2%%
Worst:
Info.Tech +2.15%;
Cons.Discr. +2.23%
Risk:
50-Leaders +3.55%,
Small Ords +2.84%.
Slight bias to Risk Aversion.
Gold Miners: +3.76%
Property Trusts: -0.38%
After two weeks of strong gains, the sector profile is beginning to lean to risk aversion. Expect consolidation or pullback this week.

MONTHLY CHART - XJO


XJO: Closed March above the 10-Month Moving Average. Positive.
MACD: Above Zero line and above signal line. Positive
RSI: 55.7. Positive.
N.B. Market has been in a sideways consolidation since July 2009.
Major Support and Resistance: 4200-5000
A monthly close above 5000 would be very bullish.
This chart remains positive. For long-term investors this is the only chart they need look at. (Just my opinion.)

WEEKLY CHART - XJO


XJO: Four weeks ago the Index broke below the support of its long-term oblique up-trend line. That is now acting as resistance. Negative
RSI.14: Above mid-line. Positive
MACD Histogram: Below Zero line. Negative.
MACD: Above Zero. Positive
Stochastic: Heading up and above its signal line. Positive.
Chart is above 20-Week Moving Average: Positive
Directional Movement Histogram: Negative.
This chart is in the balance.

DAILY CHART - XJO


Short term uptrend is intact but getting ?old?.
RSI.14: 64.5. Positive, but moving into a ?danger? zone.
MACD Histogram: Above Zero. Positive.
MACD: Above Zero. Positive.
13-Day MA: Above. Positive
150-Day MA: Above. Positive.
Stochastic: Overbought. Caution.
Currently - short-term uptrend at significant resistance level. Caution. Not a place to be adding to positions. Just my opinion.

DAILY CHART - SMALL ORDINARIES


XSO:XJO Ratio (bottom pane) broke above down trend line in mid-March. Needs to Above first line of resistance. Positive.
MACD at Zero line. Neutral.
MACD Histogram: Positive
RSI at 59 and heading up.
Stochastic: Overbought. Caution
This chart has still not reached the early March highs like the broad market (XJO). Caution.

GOLD IN OZ DOLLARS


Gold in Oz Dollars (tradable through the Gold ETF) tends to trend inversely to the general market. (A good hedge.)
MACD: At Zero Line. Neutral
MACD Histogram: Negative.
RSI: Below mid-line. Negative.
In short term down trend and now at support (horizontal and 150-Day MA).
Directional Movement Histogram: Negative.
A bounce here above 136 would be positive for Gold ETF and negative for the general market.

OZZIE DOLLAR


Oz Dollar has broken out to multi-year highs. Very Positive
150-Day Moving Average: Above. Positive
MACD: Above zero line. Positive.
RSI: Above mid-line. Positive. In the danger zone close to 70.
Stochastic. Overbought. Caution.
Resistance: Blue Sky
Support: 1.02 area
Directional Movement Histogram: Positive.
A strong Ozzie Dollar is needed to support further rises in the Australian Stock Market.
Short term overbought. Test of support at 1.02 and bounce would be very positive.


DOW INDUSTRIALS


Long Term Trend remains UP (above 150-Day MA)
Current run-up in the Dow Industrials is similar in scale and time to run-ups in June/July 2010.
Index is now at February high.
Negative divergences on RSI and MACD
Stochastic is overbought.
Volume last night was less than the previous night but still high by recent standards (past two weeks).
Market struggling to get past major resistance.
Significant support in the congestion zone (circled).
All that adds up to the probability of at least a mild-pullback.

The current resistance area around 12390 in the Dow Industrials is significant. If the next night is a big down day - expect further weakness.

The lines of demarcation are clear: above 12400 - very bullish, below 12000 - very bearish.

EWA WEEKLY - AUSTRALIAN SHARES - NYSE



EWA is an Exchange Traded Fund on the NYSE. It is basically an Index of Australian Shares priced in U.S. Dollars.
Medium Term Trend: Up.
Helped by Strong Ozzie Dollar, the EWA hit a multi-year high this week.
RSI: Above mid-line. Positive
MACD: Above Zero Line Positive.
MACD Histogram: below Zero line. Negative
Stochastic headed up and above signal line. Positive.
This chart is supportive of the broad market in Australia.

DAILY COPPER FUTURES CHART


Chart is in medium term down trend
MACD below Zero line. Negative.
MACD Histogram at Zero Line. Neutral
RSI below mid-line. Positive.
Stochastic: Below signal line and headed down. Negative..
Critical support of long term uptrend line and 150-Day MA needs to hold.
Copper is a proxy for world economic activity.

SUMMARY & CONCLUSION
TRENDS:
- XJO: monthly chart - Still above the 10-Month MA. Positive. In a
very long term sideways consolidation.
- XJO: weekly chart - medium term trend broken to the down side. May be reverting to the upside.
- XJO: daily chart - up. Overbought and at major resistance.
- Dow Industrials: short-term up. Overbought and at major resistance
- Small Ordinaries: short-term up. Overbought.
- Ozzie Dollar: Broke out to multi-year highs. Positive for the Australian stock market.
- Gold in Oz Dollars: short-term trend - down. Now at support.

XJO currently at 4862.
Major Support and Resistance for XJO: Resistance: 5000; Support 4200 . Mid-point 4600.

Copper in the medium term has turned down. That?s negative for the markets

Any correction is likely to be muted because of Bernanke?s money supply (QE2) and the strength of the Presidential Cycle in the 3rd Year.

Next Week: Geo-political events (oil price) will continue to have an impact on general market sentiment. Oil Price (West Texas) currently rising and close to 110.

The Game Plan:
- Wait and see. Probably unwise to add to positions at this stage.
- Most likely scenario is a short term pull-back this week and further rises.
- Short-term the market is overbought. Caution.

WORDS OF THANKS

Two weeks ago today, I was confronted with a family tragedy. I lost my much loved daughter. The emotional impact has been profound.

She is survived by her partner and two beautiful, angelic daughters (my grand-daughters).

The task of picking up and renewing their lives now confronts them.

In the past two weeks, I have been overwhelmed by expressions of good will, condolence and offers of help - many from people I only know through the Hot Copper network. Many of whom I have never met face to face.

You have no idea how much that has helped at this difficult time.

Thanks.

Red