redback report week ended 11/2/2011

I'll save you plowing through the detail - or even going to the summary at the end: The American Market is in Cloud Cuckoo Land. By the way - that's not a technical analysis term you'll find on Investopedia - so don't bother looking. :)

INDICES ONE-WEEK PERFORMANCE


XAO: +0.24%
Two S&P Sectors were up. Eight Sectors were down.
Best: Financials, +1.9%; Telecoms. +1.1%
Worst: Info.Tech, -5.2%; Consumer Consumer Disc. -2.5%
Risk: 50-Leaders (+0.6%) out-performed Small Ords (-0.7%). Negative.
Gold Miners: -0.7%
Property Trusts: -1.1%
Materials: -0.3%
Although the market was just positive, the structure was negative.

MONTHLY CHART - XJO



XJO: above the 10-Month Moving Average. Positive
MACD: above its signal line. Positive
MACD: Above Zero Line. Positive
RSI: above 50. Positive
Williams%R: above -20. Positive. But flashing amber.
DMI (Directional Index): Crossed above zero - Positive.
In the very Long term the outlook remains bullish.
N.B. Market has been in a sideways consolidation since July 2009. (Maybe long-term term deposits are the way to go?)

WEEKLY CHART - XJO



XJO: Above its a long-term up-trend line.
RSI.14: Above mid-line. Positive
MACD Histogram: Negative Divergence.
MACD: Above Zero and above signal line. Positive
Weekly Williams%R: Above the overbought level. Warning sign.
Chart is above 13-Week Moving Average: Positive
Index at long term oblique resistance line of bearish upsloping wedge.
A break above that wedge would be very bullish.
Caution required.

DAILY CHART - XJO



RSI.14: Above mid-line. Positive. On Thursday it hit 68.7 - close to overbought.
MACD Histogram: Above its mid-line. Positive.
MACD: Above Zero. Positive.
Williams%R: Broke below Overbought level. Caution
13-Day MA: Above. Positive.
Hit oblique resistance line on Wednesday.
Wed, Thurs and Fri: reversal pattern
Further downside likely.

DAILY CHART - SMALL ORDINARIES



Compare to XJO.
Rejected by January high. XJO above January high.
Small Ordinaries (XSO) in sideways consolidation for two months. XJO in uptrend for two months.
Negative divergences on RSI and MACD.
The Small Ordinaries represent breadth in the market. Positive breadth is necessary for the market to continue upwards.

GOLD IN OZ DOLLARS



Gold in Oz Dollars (tradable through the Gold ETF) tends to trend inversely to the general market.
The Ratio Chart of Gold:XJO broke to the upside this week. Negative for the general market.
MACD Histogram and Directional Index both broke to the upside of zero this week.
Caution for the general market.

OZZIE DOLLAR



Test of 1.02 has failed.
13-Day Moving Average: Below. Negative
MACD: Testing signal line. Caution
RSI: Below mid-line. Negative.
Williams %R: Below mid-line. Negative.
Resistance: 1.026
Support: 0.99
Plenty of support provided by congestion area (circled).
Long-legged doji (Friday) could be a reversal (upwards) signal. Confirmation on Monday needed.
A strong Ozzie Dollar is needed to support further rises in the Australian Stock Market.


DOW INDUSTRIALS



Long Term Trend is UP
RSI.14: 78.2 - Very Overbought. Warning.
MACD: Above zero, above signal line. Positive
Williams %R overbought. Warning.
Volume: After dropping for two weeks, Thursday?s volume was a 2-Month high. Warning.
This chart is now in Cloud Cuckoo Land. :)

HONG KONG DAILY


Medium Term Trend: Down.
RSI: Below mid-line. Negative
MACD Histogram: Below Zero. Negative. Positive divergence from price.
Williams %R: At mid-line. Neutral.
Relative Strength: HongKong/DowIndu (Bottom Pane) Negative. Chinese stock markets tend to be the ?Canary in the Coal Mine? for World Activity.
Caution required

RATIO CHART U.S. BONDS:COMMODITIES



While Commodities outpace 30Yr Bonds, the American market should continue to be bullish.
Negative divergences on major indicators are flashing warning signs.
Caution

SEASONALITY - FEBRUARY

OTC: Since 1963 up 52% of years with no gain or loss
OTC: Since 1963 in 3rd Yr Presidential Cycle up 67% of years with average gain of 1.9%
S&P500: Since 1928 up 52% of years with average loss of 0.4%
S&P500: Since 1928 in 3rd YR Presidential Cycle, up 65% of years with an average gain of 1.2%
4th February ushers in the Chinese Year of the Rabbit. According to one soothsayer: Money can be made without too much labor. :)

SUMMARY & CONCLUSION

TRENDS:
XJO: long/medium-term - up.
XJO: short-term - Up
Dow Industrials: medium-term - up
Dow Industrials: short-term - up (now in Cloud Cuckoo Land)
Hang Seng: medium-term trend - down. (Chinese market often
leads.)
Ozzie Dollar: Sideways consolidation. Short-term trend - down.
Gold in Oz Dollars: Medium-term Trend - down, Short-term trend - up. (Negative for general market.)

XJO currently at 4881.

Major Support and Resistance for XJO: Resistance: 5000; Support 4200 .
Ratio American Bonds:Commodities - Positive for the general market
Seasonalities for February in 3rd Yr of Presidential Cycle favour the upside.
Recent volume pattern on the American market is Negative. (Low Volume followed by a sudden surge upwards.)
XJO Long-term Chart Pattern: Rising bearish wedge. Break upwards - very bullish; break downwards - very bearish. Wait and see.
Next Week: The probabilities for a down side correction have increased.
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.
Monday in America is a holiday. Expect our market to be flat. Tuesday?s market may determine the direction for the rest of the week.

Last week I suggested that the market would be flat to down. The XAO was up just 0.24% and eight out of ten sectors were down. I think that gets a Tick.

The coming week - more weakness. But watch what happens on Tuesday. As always - that's really just a bit of a guess.