Australian Market. Indices: One-Week Performance. (The Week That Was.) International Markets: One-Week Performance. Australian Market. XJO – Monthly Chart (for the long-term investor) Australian Market. XJO – Weekly Chart Australian Market. XJO – Daily Chart Australian Market. XSO – Weekly Chart Australian Market. XMJ – Weekly Chart. International Markets: SP500 – Weekly International Markets: SP500 – Daily International Markets: Dow Transports – Daily International Markets: FTSE Euro Top 100 – Weekly International Markets: China88 – Weekly Summary and Conclusion SLF – Weekly STW – Weekly Oz Gold – Daily
AUSTRALIAN MARKET: THE WEEK THAT WAS. INDICES ONE-WEEK PERFORMANCE
•Market structure is positive. Defensives dominate the “Worst” category. Breadth was good. I would have preferred to see Energy and Consumer Discretionary in the “Best” category. But Energy did better than the general market, up +1.23%. Not too shabby.
INTERNATIONAL PERFORMANCES: ONE WEEK This chart speaks for itself. Actual percentages for each Index are given in the Commentary section towards the end of this post.
AUSTRALIAN MARKET: MONTHLY CHART – XJO
•The chart is currently at 4583.1. The monthly high in October was 4581.8. Marginally in front this month – but only the middle of the month. •The chart took a breather in November after five months up. It now looks set-up to finish above the October high. •Stochastic and CCI are both overbought. They can remain so for months. •This chart has a lot of positives. The uptrend is strong and remains above the 20-Month TMA. The chart possibly shows a move up to XJO 5000. Not a bad move. We’re not going to see that this month, but an April high around there is a possibility. •We’re now close to four years since the end of the GFC. We’ve made no head-way in the past three years. The monthly close in December, 2009 was 4870.6. Until 5000 (round figures) is crossed to the upside this is still a secular bear market.
AUSTRALIAN MARKET: WEEKLY CHART – XJO
•We’ve now had four weeks of solid buying. That’s still not dangerous – five weeks up might be. •Stochastic and CCI are both overbought, but can remain so for weeks. RSI is “highish”, 66.8. That’s in a zone where reversals can occur. MACD is showing a potential negative divergence. •The oblique restraining line shown on the chart suggests a potential “top” for this run-up. The chart is close to that level.
AUSTRALIAN MARKET: DAILY CHART – XJO
•Although we had a positive week, the past three days have been anything but. •Two out of three days (Wednesday and Friday) have long upper tails – selling pressure. Wednesday was on heavy volume. Thursday was a tiny little narrow spinner, on heavy volume. That’s not continuation material. But, you never know. •MACD Histogram and Stochastic have given tentative sell signals. MACD Histogram and CCI are showing potential negative divergences. RSI at 73.9 is overbought. •Last week I gave this as my preferred scenario: ”This has the legs to go up to around 4600 before a significant retracement.” Intra-day on Wednesday, XJO hit 4603.5 and reversed. We still need to get a big down day to confirm. •This may be a “buy the dip” scenario, giving a run-up into the end of the year. Not much time left for that scenario to work out. •Under normal circumstances, I’d say a big down day would herald the start of a significant pull back, but seasonals are against that. So that suggests that January could be sick.
AUSTRALIAN MARKET: SMALL ORDINARIES – WEEKLY
•XSO had a good week, but continues to respect the long term down trend line. Even if that is broken to the upside, XSO would need to break above the pivot back in mid-October to prove its broken its long term down trend. •XSO is currently at 2250.4. The close of the pivot was 2318.8. That’s a move of about 3%. XSO, being volatile, could do that in a week. But don’t hold your breath. It still needs to break above that formidable oblique down trend line.
AUSTRALIAN MARKET: MATERIALS – WEEKLY
•Like XSO, XMJ had a strong week. It’s now back to critical resistance. Stochastic and CCI are mildly overbought – they can stay overbought for weeks. •The chart looks positive bouncing off the 30-Week TMA four weeks ago. It’s now in a well established medium term up trend channel. The major obstacle now is critical horizontal resistance. •Watch.
INTERNATIONAL MARKETS: SP500 – WEEKLY
•The SP500 was down on the week, -0.32%. That was after a flat week the week before. The long upper tail on this week’s candle indicates selling pressure. •This run-up from mid-November may be coming to an end. Indicators are about mid-range, RSI just above 50, Stochastic at 55.3, CCI is a smidgin below its tide-line of zero. Those are in a zone where a reversal could occur if the past month is just a reaction rally after the big October/November fall. The jury is out.
MACD Histogram. Below zero. Negative. MACD. Above zero. Positive. RSI.9 is at 51.1. Falling from overbought. Stochastic. 66. Below its signal line and the 80 level. Negative. CCI.14: +3.07. Negative. Continues to fall away from +100. •The chart is now at the oblique support line of the up trending channel. A bounce here would be bullish.
•Indicators suggest there’s more downside. If the RSI.9 gets to about 40 we might then see a bounce. At this stage, we’re seeing a pull-back in an upside trend. A break below the pivot on 5 December (1398) would be serious. •Seasonals favour a bounce starting sometime next week.
INTERNATIONAL MARKETS: DOW TRANSPORTS – DAILY
•The Dow Transport Index has been in a sideways trading range for many months. •Tops and bottoms within that range have coincided with tops and bottoms in the Dow 30 and SP500, although those two have been in up trends. •This week has been highly unusual. Candles on the past four days all have long upper tails, indicating intra-day strong selling pressure. But the index hasn’t capitulated. Rarely can an index withstand such sustained pressure. •A big down day would be very bearish and send the chart back to the bottom of the trading range – and the major indices would also capitulate. •Watch.
INTERNATIONAL MARKETS: FTSE EURO TOP 100 – WEEKLY
•The Euro Top 100 was up marginally this week, +0.14%. The candle is a narrow range spinner, indicating indecision. A big down candle next week would be bearish. But, at this stage, we have indecision. •A drop back below support would be bearish. Technically, that’s quite possible. This week’s high (2344.12) is about the same as the high back in early July (2351.21). That’s where the Index last had a false break. •Stochastic and CCI are overbought. RSI is more benign. MACD is showing a possible negative divergence. This chart is in the balance. •Once again, the seasonals are against a big down side move. But nothing’s impossible.
INTERNATIONAL MARKETS: CHINA88 – WEEKLY
•Tai hao la! Australian translation: What a bewdy! China 88 up over 10% in two weeks. •China88 is a Dow Jones Index made up of the blue chip stocks on the Shanghai and Shenzen stock exchanges. •The medium term down sloping wedge has been broken to the upside. The measured move for such a break is the top of the wedge which is also a critical horizontal resistance line. That still wouldn’t necessarily break the very long term down trend from 2009, but it would be a nice start. •After two big weeks up, some consolidation might be in order. A pause or a small pull-back would be healthy.
COMMENTARY & CONCLUSION
This past week, little correlation existed amonst major world indices I watch. China88 was the standout performer, while the SP500 and Nasdaq100 were weak. Europe was more or less flat. The figures: XAO, +0.86%; XJO, +0.69%; Dow 30, -0.15%; SP500, -0.32%; Nadaq100, -0.47%; Euro Top 100, +0.14%; China88, +5.29%. That’s a dog’s breakfast. Correlation – pfffft!
Except for China, all those indices showed some indication, of lesser or greater extent, of selling pressure late in the week. All of China’s rise came on Friday. If Australia is now more tied to China than America, we may be able to withstand falls in America which seem likely, at least in the short term.
Australia, however, looks likely to fall, at least in the short term. CBA, the second largest stock in our market, is now in Cloud Cuckoo Land. It’s nudging up against the October, 2007 all time high and is extremely overbought. At least some sort of a pullback or gentle consolidation seems inevitable. BHP, the largest stock in our market, has now been up for eight days in a row. Seven days up is rare. It could, of course, go up for 11 days or 13 days or whatever days. Precedence is made to be broken on the stock market. Indicators are now very over bought, not as extreme as the CBA, but the odds are to the downside. Together these two stocks make up nearly 30% of the 20 Leaders. If they fall, it’s difficult to believe that the market could withstand such downward pressure from the two big leading stocks. Volume analysis and intra-day action over the past three days suggests further downside action.
The previous week, ending 7 December, saw all the major markets move more or less in sync. That suggested a coordinated unfolding of a Santa Rally. That thesis has now been dashed. At best, I think we could see a pull-back early next week, with a Santa Rally perhaps starting towards the end the coming week going through to the New Year. But, we could have a rare year when the Santa Rally doesn’t eventuate.
Friday, 21 December, is a triple witching index expiration day. 22 out of the last 27 December Triple Witching Days in the NYSE have seen the SP500 rise. Odds: 81.5% that America will be up on 21 Dec. Not bad odds. And fits with my scenario of a late week rally. We’ll see.
Meanwhile, in America, the Fiscal-Cliff continues to loom. The American media is obsessed with it. The market still seems to be saying that a deal will be done. But not just yet.
Remember: do your own research. Make your own decisions. I hope that the information I show might help you just a little.
For daily updates – check http://redbackmarketreport.wordpress.com/
ETF: SLF – WEEKLY
•This week I’ve continued to show the chart for XPJ – the Property Sector. I’ve mentioned before that SLF has low liquidity which means that prices on offer are often those offered by the market maker. They offer prices with a very wide spread. If you put in an “at market” order you’ll often end up with a price which is out of kilter with the underlying instrument. This also results in distortions in the tracking stock, SLF. •This week the Property Sector was flat, +0.05%. That hides a big rise early in the week and then a big fall. The needle is a “hypodermic” which is usually bearish. •The Index is overbought. RSI is above 70. Indicators are showing possible negative divergences which often come before a fall. •The Property Sector is an interest rate sensitive sector. It’s borrowing costs go down and investors seeking income will switch out of other instruments (e.g., bonds and bank accounts) and into Property Trusts seeking higher dividends. While the RBA is in rate cut mode, it’s difficult to see how the Property Sector can suffer signficant falls. •According to Comsec, SLF Dividend Yield is 5.3%. That remains good value. The stock went Ex-Dividend on Friday 28 September, 2012. Dividends are paid quarterly. Dividend for the September quarter was 8.2179 cents per unit. This is a fall on the comparable period last year when a dividend of 9.64 cents per unit was paid. Ex-dividend date in December is traditionally the last trading day of the year, which this year falls on 31 December. •(SLF is the Exchange Traded Fund which tracks the performance of the Property Sector on the Australian stock market.)
ETF: WEEKLY STW
•STW is the tracking stock for the ASX200. •This week the ETF rose +0.67%. •Momentum Indicators are overbought, or close enough. The recent break above resistance (now support) could be a false break. •Take signals from the XJO chart. •Dividend Yield: 3.9%. The stock went ex-dividend on 25 June – dividend was 65c per unit. For the financial year, the dividend was 170.79c – the best since the the GFC. Dividends are paid half-yearly, so the next ex-dividend date is in late December. The actual date is usually the last trading day of the year – which, this year, is 31 December. •(STW is the Exchange Traded Fund which tracks the performance of the ASX200.)
COMMODITIES GOLD IN AUD – Daily
•In the wider scheme of things Oz Gold (Gold priced in Australian dollars) has a long term upward bias and trends inversely to the broad Australian market (XJO). This is particularly evident in times of extreme stock market stress. •AUD Gold was down this week, -1.23%. (Inverse to the Australian stock market.) •Thursday saw a candle with a long lower tail indicating buying pressure. Friday’s range was within the range of Thursday. Indecision. We could be seeing a bottom form. •RSI is very oversold, suggesting that a move up is not far away. CCI is showing a marked divergence providing further evidence for a possible move up. •The chart is currently opposite a congestion zone which may provide support. •While positive for Oz Gold, it does suggest a possible set-back for the stock market. But this isn’t a timing device. The inverse correlation between Oz Gold and the XJO is loose. •For a pure buy’n’hold investor, some exposure to OzGold has much to commend it, particularly as a hedge against falls in the general market. Plus, the long term performance has been positive. (Usual caveat – past performance is no guarantee of future performance. •(Note. Gold priced in Oz Dollars is quite different from Gold priced in US$ – the figure usually quoted in the media. During the GFC – POG in US $ fell sharply along with other asset classes while the POG in AUD rose sharply.)
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