Indices: One-Week Performance. XJO – Monthly Chart (for the long-term investor) XJO – Weekly Chart XJO – Daily Chart Australian All Ordinaries Point and Figure Chart. Small Ordinaries (XSO) Daily Gold in Oz Dollars – Daily Chart Currencies AUD/USD Weekly Dow Jones Industrial Average – Monthly Dow Jones Industrial Average – Daily Copper Summary and Conclusion STW
INDICES ONE-WEEK PERFORMANCE
XAO: +0.37%. Nine out of ten S&P Sectors were up.
Best:
* Info Tech +7.47% * Health +3.13% * Industrials +2.39%; (Info Tech boosted by successful completion of takeover in America by CPU.)
* 50-Leaders +0.16%, * Small Ords +1.21%. That’s a bullish reading.
Gold Miners: +3.76%
Property Trusts: +1.82%
Action in the indices has been relatively muted for the past two weeks. A big move is coming. The Small Ords suggests that will be up.
MONTHLY CHART - XJO
The long term trend is down but may be turning up.
October’s candle is a bullish engulfing candle. A monthly bullish engulfing candle is usually a sign of further long term upside.
The October candle hit a high of 4417.6, just a smidgin below the 10 Month Exponential Moving Average of 4444.8.
The chart is currently at 4296.5. The monthly 10EMA is at 4417.8. A mere 121.3 points to go.
All momentum indicators have turned back up.
We’ve finished the second week of November. Only final monthly readings carry weight on this chart. Plenty of action to come.
WEEKLY CHART - XJO
This week the weekly chart closed in the upper half of the Bollinger Bands and above major support set back in mid-2010.
The weekly candle is a wide range spinning top. Plenty of action - but, in the end, little movement.
Momentum Indicators are all positive, with some at or close to overbought levels.
Stochastic and RSI, however, suggest there’s plenty of room for upside movement.
Major support from 2010 lies at 4220. On the daily chart (see next chart) major support lies around 4140.
DAILY CHART - XJO
The chart is in a short-term symmetrical triangle. These usually break in the direction of the trend which is up. (They can, of course, break to the downside, but not usually.)
This chart is about as non-committal as it can get. Friday’s candle is bang in the middle of the Bollinger Bands and momentum indicators are in the middle of their normal ranges. MACD is flatlining
This is setting up for a big move - which will probably be up. But don’t bet on it until it happens.
Good support lies around 4140. A break below there could see support at 4050 tested.
At this stage, it remains wait’n’see time.
ALL ORDS - POINT’N’FIGURE
The Point and Figure Chart remains exactly as it was last week. That’s what you expect on a P’n’F Chart when the index has shown little movement. P’n’F Charts filter out the noise inherent in markets.
The chart remains with a “Bull Trap” reading, which is bearish.
Stock Charts explains: “The Bull Trap occurs when prices reverse after a one-box breakout and the subsequent O-Column moves at least three boxes lower. A one-box breakout is not that strong and the immediate reversal shows renewed selling pressure.”
We need to see a reversal of that "Bull Trap" reading.
SMALL ORDINARIES - DAILY
The health of the market is dependent on health in the Small Ords. The big blue chips can carry the market higher - but only for so long if the rally is not broad based.
The Mansfield Relative Strength Indicator, which compares the Small Ords to the XJO, has been rising steadily since late September. That’s a positive development. It still needs to get above zero
The chart has been in a long sideways consolidation since early October. (Confirmed by the flatlining MACD.) A decisive break above 2436 would be bullish for the whole market. (It nudged above that on Wednesday, but then immediately fell back.)
We need to see the Small Ords outperforming the XJO to be confident of a return to bullish conditions.
GOLD IN OZ DOLLARS - DAILY
I reference Oz Gold as a counter-point and reverse confirmation of the Australian market. Oz Gold tends to trade inversely to the XJO and can be used as a hedge against falls in our stock market.
Since late October, Oz Gold has outperformed the Australian stock market which has been in a sideways consolidaiton. Indicative of some of the fear in the market.
The chart has now given clear signs of rolling over to the downside from extreme overbought conditions. That may be a sign that fear is disappearing from the market, and the broad market indices can resume their uptrend.
Confirmation is needed by the broad market indices. Oz Gold by itself is not a counter-trend timing device.
AUD/USD - Daily
Aud/USD broke down from significant overhead resistance 10 days ago.
In a mirror image it has now reversed up from significant support over the past two days. This is also off clear oversold levels.
It has now tested the 101.5 level. A return to the 1.07 level now looks likely. In the near term, that should support a rise in the broad stock market.
A rising AUD is necessary for capital inflows to occur into Australia. Without that a liquidity squeeze occurs which helps to generate falls in Australian asset classes.
DOW JONES INDUSTRIAL AVERAGE - MONTHLY
That positive October candle on the Dow Industrials was extra-ordinary. Nothing quite like it exists going back to 2003.
October also saw the chart break above the 10 Month Exponential Moving Average.
November has so far maintain above that key level.
The chart has also nudged up to the down trend line.
A monthly close above that would be bullish. Two weeks to go.
DOW INDUSTRIALS - DAILY
The chart of the daily Dow Industrials is in a symmetrical triangle pattern. These normally break in the direction of the trend - which is upwards. They don’t always do that - but the probabilities are now on the side of the bulls.
Of particular interest in this chart is the bottom pane. It shows the On Balance Volume for the Dow Industrials.
This suggests that the index has been under accumulation since late September. And hasn’t abated during the sideways consolidation since late October.
This is another factor favouring the bullish case.
COPPER DAILY
This is a daily chart of Copper. Copper is a proxy for world economic growth, particularly Chinese.
Copper completed a three-day reversal upwards signal on Friday. The previous two reversal signals were accurate.
A test of resistance at 3.77 seems likely.
This is another secondary indicator suggesting that the broad stock market will move up.
SUMMARY & CONCLUSION
Some weeks I have a firm opinion about what will happen in the market in the near term. Last week I said: “I simply don’t know..” As it transpired, the market didn’t know either, up just +0.37%. In future, when I feel I don’t know - I think I’ll opt for: “I think the market will be flat this week.” :)
This week, I simply don’t know, in the very short term. But I don’t think it will be a flat week. The past two weeks have been relatively benign in overall movements. That has to end soon. Of course, it may not be in the coming week (giving us three weeks flat in a row). It could be the week after. That would be the week before American Thanksgiving. American Thanksgiving occurs on the fourth Thursday in November. This year 24 November. The past 14 out of 17 occurrences, the Dow Industrials has been up in the week before Thanksgiving.
So - maybe the early part of the week will be choppy - with the end of the week turning up. I’m really looking at a two-week scenario - and I’m expecting the market to be ahead in two weeks time.
Do the charts support such a proposition? Consider the follow:
* The primary daily index charts (ASX200 and Dow Industrials) are both in symmetrical triangles. These usually break in the direction of the trend - upwards. * The Dow Industrials Monthly Chart is above the 10 Month Exponential Average. That’s bullish. * The On Balance Volume for the Dow Industrials Daily is strongly bullish * The Australian Small Ordinaries compared to the ASX200 is bullish. * The AUD/USD Daily Chart has given a reversal upwards signal. (This is a secondary indicator.) * The Copper Daily Chart has given a reversal upwards signal. (This is a secondary indicator.) * Oz Gold Daily has given a tentative reversal downwards signal. This tends to trend inversely to the ASX200 and is a secondary indicator. So this is a bullish sign for the broad stock market in Australia.
To sum up: I’m siding with the bulls heading into American Thanksgiving. We might be choppy early this week - then up. But I could easily be wrong. Until those symmetrical triangles are broken to the upside on strong volume, there’s always the possibility they’ll turn down. Watch the triangles. And - we need to see a bullish signal on the XAO Point and Figure Chart.
S0 - Redbacka - you’re bullish. What’s the opposing view? Answer - I’ll leave that to Robert W. Colby (author of ”The Encyclopedia of Technical Market Indicators”):
'Dow Theory signaled a Primary Tide Bear Market on 8/2/11, when both Dow-Jones Averages, Industrial and Transportation, closed below their closing price lows of the previous 11 months. This Bear Market was confirmed on 10/3/11 by lower closing price lows for both Averages. Both Averages would have to close above their closing price highs for the year to indicate a "Turn in the Tide".
'A Dow Theory Primary Tide Bear Market is a powerful beast that must not be underestimated. The median Dow Theory Primary Tide Bear Market in history lasts 16 months and takes stock prices down 34%. In a Dow Theory Primary Tide Bear Market, the big surprises usually come to the downside. Typically, there is no safe place to hide in a Dow Theory Primary Tide Bear Market. Even those stocks that have held up relatively well through most of the Bear Market eventually succumb to the relentless tide of selling.'
Don’t pre-empt the market. Remember: do your own research. Make your own decisions. I hope that the information I show might help you just a little.
My weekly commentary on the near term future direction of the market is simply an educated "guess" and shouldn't be taken as investment advice.
For daily updates - check http://redbackmarketreport.wordpress.com/
DAILY STW
Not much to say. STW is showing a similar profile to the XJO (which it must do as it is the tracking stock for the XJO).
The chart is in a gently up-sloping channel. Whenever the chart gets close to the top or bottom lines of the Channel and reverses - a trend change within the channel is likely. The chart is currently well away from the upper level.
Read in conjunction with the general market commentary above.
Dividend Yield: 4.3%. Next ex-dividend date is late December.
(STW is the Exchange Traded Fund which tracks the performance of the ASX200.)
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