Indices: One-Week Performance. XJO - Monthly Chart (for the long-term investor) XAO - Weekly Chart XAO - Daily Chart Gold in Oz Dollars - Daily Chart Currencies Dow Jones Industrial Average SPX and SPX:Gold Ratio Daily Copper Chart Small Ordinaries (XSO) Ratio Chart - Commodities/Bonds New York Panic? Summary and Conclusion
INDICES ONE-WEEK PERFORMANCE
XAO: -1.81%. Eight out of ten S&P Sectors were down. Best (two of three are defensives): Info Tech +1% Telecoms +0.91% Consumer Staples -0.16%;
Risk: 50-Leaders -1.6%, Small Ords -1.8%. Nothing in that one way or the other.
Gold Miners: -2.15% Property Trusts: -0.28%
Eight of the last nine weeks closed down. Seven of the past seven weeks have set new weekly lows.
Here comes another one Here it comes again Here comes another one When will it ever end? Monty Python
MONTHLY CHART - XJO
Only end of month results should be considered with this chart. ATM it looks more than ominous - it looks downright dangerous.
Currently XJO: the Index is sitting below the 10-Month Moving Average. Negative.
Below the lower tine of the Pitchfork. 4200 beckons.
MACD Histogram, RSI.9 and CCI.14 are below their mid-lines. Stochastic is below its signal line.
N.B. Market has been in a sideways consolidation since July 2009.
Major Support and Resistance: 4200-5000
This chart is giving off plenty of negative signals. Unless this breaks upwards soon, it looks like we?re headed for 4200.
Only for long-term investors with a buy?n?hold mentality.
WEEKLY CHART - XJO
Major resistance: 5000. Support: 4500 then 4200 (round figures). The chart is at support.
RSI.9: 29.2. Oversold. RSI below 30 on the weekly chart usually provides bargain basement buying. MACD (7,18,12): Below Zero. Negative. MACD Histogram: Below Zero. Negative. Stochastic: 14. And dropping. I?ve frequently said over the past weeks that we might have to wait till the Stochs got below 20 before the downtrend would finish. Well - its there now. Now we have to wait for it to turn up. CCI.14: -134.8 and dropping. Negative. Below -100, the region where rebounds can occur.
Chart is below 13-Week Moving Average: Negative.
Despite weeks of falling, the chart still hasn?t reached the Median Line. That?s a bullish condition.
Waiting for a break by the chart above the upper tine of the pitchfork.
DAILY CHART - XJO
The daily chart is right at support of the intra-day lows set in mid-March. RSI.9: 29.3. Bargain basement sale territory. MACD Histogram: Marginally below Zero line. Neutral. MACD: Below Zero. Negative. Positive divergence. Stochastic: 11.1. below signal line. Heading down. Needs to rise above 20. CCI.14: -119.9. Back below -100. Positive divergence.
Chart is currently locked between a narrow band of support and resistance. (4485-4577). A break either way should determine near term direction.
Every attempted rally so far has been squashed.
Current support level looks crucial.
Volume reached panic proportions on Thursday and Friday (helped a little by Options Expiry), close to 2Billion shares traded on Friday - levels not seen since mid-March.
Donchian (the father of trend trading): ?Watch for volume climax, especially after a long move.?
GOLD IN OZ DOLLARS - WEEKLY
Gold in Oz Dollars (tradable through the Gold ETF) tends to trend inversely to the general market.
For the past four weeks Oz Gold has been bumping up against resistance around 141.50.
The stock has a good record of pivoting off the median line.
CCI.14: +119.5 and falling. A break below +100 would be negative. RSI.9: 66.6. Falling.
A break above resistance would be negative for the general market. Any break, given the overbought nature of the stock, seems likely to fail.
Watch this space.
CURRENCIES
AUD:JPY support level of 84.4 held this week. If that breaks then another strong support level lies nearby at about 83.4. A break below that would be bearish for our stock market.
The Japanese Yen is one of the major currencies involved in the ?carry trade?. It is an important currency watched by traders in America. The chart needs to break at least above horizontal resistance at 87.7 for it is to add a positive tone to the Australian stock market.
AUD:USD, like the AUD:JPY, has been in a sideways drift for about two months. A break below the 105 area would be bearish for both the currency and our stock market.
Note - Although weak, neither of these two currencies has been as weak as our stock market. Liquidity remains solid. Money has not been pulled out of the country in a way suggestive of a bear market in stocks.
DOW JONES INDUSTRIAL AVERAGE
Last week in the "Dow Jones meets Max" Movie, Maxwell Smart drew a third line in the sand and dared Siegfried to step over that one. Siegfried then shot at Max with his brief-case gun. Max turned to Agent 99 and uttered his famous line: ?Missed me by that much.? Siegfried was last seen reloading his brief-case gun. ? to be cont.
Below the 13-Day MA. Negative Closed the week at the 150-day MA (neutral).
Indicators: - Stochastic 12.9, above its signal line but below 20. Oversold. - RSI.9. 40.2. Rising. Needs to kick above 50. - The 13-Day MA is above the 150-Day MA. ?Positive - MACD Histogram. Above Zero. Positive. - MACD. Below Zero. - Formed a bull shoulder. Positive. - CCI.14: -40.5. In an uptrend above -100. Positive.
On Friday the Dow Industrials hit the 13-Day MA and retreated back below two ?lines in the sand?. It needs to get back above 12100 to be a chance of returning to bullish conditions.
The Dow Jones Industrial this week finally broke its run of six down weeks. But only marginally. It still looks under pressure.
SPX & SPX:GOLD RATIO
These are weekly charts of the SPX and the ratio of the SPX to the price of Gold.
In the past twelve months, the SPX has had a tendency to bottom when the SPX:Gold Ratio drops below 0.84. It?s currently at 0.827.
Could it go lower? Yes - so it would be wise to wait for a rebound in the SPX daily chart before taking action.
The past two weeks has seen a pick-up in volume on the SPX. This week was higher than last week. This might be enough to wash out the bears - but volume has been typically higher than this at the bottom of retracements.
DAILY COPPER FUTURES CHART
Copper is a ubiquitous industrial metal. As such the price of copper acts as a proxy for World economic growth. Supply and demand determine the price of this metal. A falling copper price suggests slowing World economic growth.
Copper has been in a long-term down trend channel since mid-February. It needs to break above that for positive sentiment to return about World economic growth.
Given this long-term down trend it is no wonder that stock markets around the world, and particularly Australia, have been in a funk.
SMALL ORDINARIES (XSO)
The Small Ordinaries is a key indicator of the underlying strength of the market and the willingness of participants to take on risk. Without that willingness the market falls.
A comparison of the performance of the Small Ordinaries with the XJO (ASX200) provides an assessment of that willingness to take on risk.
The Mansfield Relative Strength Index (bottom pane) shows the XSO, although falling, is forming higher lows against the XJO - positive divergence, I.e., the XSO is still performing better than the XJO That?s bullish.
The XSO shows a similar pattern to the XJO in that every attempted rally has been ruthlessly sold into.
I remember saying several weeks ago that the stance for the trader had changed from ?buy the dips? to ?sell the rallies?. Prophetic?
It could, however, be close to a bottom.
Watch this space.
RATIO CRB:USB
The chart of the CRB:USB if often a leading indicator for the stock market e.g., the CRB:USB Ratio peaked in early April. The Dow Jones didn?t peak until the beginning of May.
The nascent rally in CRB:USB Ratio was smashed this week with concerns over the Greece crisis (Bonds rally) and falls in oil (oil price was too high) affecting the CRB Index
The Ratio could be forming a large ragged Head?n?Shoulders pattern. A break below the current level would be ominous. A break back above 2.8 on the ratio would be bullish.
The relationship between Commodities and Bonds is a complex one. If Oil was ?too high? and now falling, that may be good for the world economy - in the long run. But, in the short run it might also be an indication that the world economy is weakening - or the Saudis are pumping more oil.
This is not a ratio to be used as a primary indicator but as background information.
NEW YORK PANIC?
The first chart shows New 52-Week Highs and New 52-Week Lows on the NYSE. Smoothing is provided by 3-Day Averages on each. Early in June, New Lows surpassed New Highs and lifted above the 50 Level - something not seen in the February-March retrace. This is investors selling out of stocks at panic levels. Selling remains at panic levels.
The second chart shows the VIX Index. This is a measure of volatilty occurring in the options market. Thursday and Wednesday saw a spike high above the upper Bollinger Band. On Friday the candle fell back into the Bollinger Bands. That looks promising - but a similar event occurred back in late February. The Index went on to make new highs in mid-March. Increasing volatility is usually associated with increasing fear in the market as punters buy more and more out of the money put options. (It?s more complicated than that - but that will do for now.)
Panic is appearing in these figures. That suggests a bottom is not far off. But watch the market itself. These levels can become much worse before the market turns up.
SUMMARY & CONCLUSION
TRENDS: - XJO: monthly chart - below the 10-Month Moving Average. Broken below the lower tine of the ?Andrew?s Pitchfork?. Looks dangerous but wait till end of the month to determine direction. In a very long term sideways consolidation. (The one chart IMO the long-term investor needs to look at.) - XJO: weekly chart - Down. Stochastic now below 20. The market is now oversold on the medium term chart.. - XJO: daily chart - down. Oversold. Needs the RSI.9 to get above 50 and a break out of down trend channel. - XSO: medium term - down. Positive divergence from XJO. - DJIA: Medium term - down. - Currencies: Short term - sideways. AUD/JPY and AUD/USD at or close to major support levels. - Gold in Oz Dollars: Four weeks at resistance. Break higher would be negative for broad stock market. Close to overbought.
XJO currently at 4484.9. (4500 in round figures). That?s a major support level. Next level of support 4200
Copper - In a long term down trend. This has to turn up before confidence returns about the world economy.
Commodities:Bonds Ratio. Short term trend is sideways. Potential Head?n?Shoulders Pattern forming. Completion would be very negative.
SPX:Gold Ratio: over the past year at a level where reversals have occurred
NYSE New Lows are now at panic selling levels. They can, of course, always worsen. VIX has also reached panic sell levels. It can, of course, always get worse.
So - markets are generally very weak and panic selling is evident. Volumes on the Australian market have reached levels usually associated with major market bottoms. We?re near a bottom. Currencies have remained atypically bouyant.
Copper is weak and the Commodities:Bonds Ratio raises serious doubts about market action. A short term rebound is likely in the next week or so. What happens after that will determine medium term direction.
Remember: do your own research. Make your own decisions. I hope that the information I show might help you just a little.
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