Weekly WrapThis week trading in the XJO was negative, finishing...

Weekly Wrap

This week trading in the XJO was negative, finishing down -1.23%.

Clearly, the damage occurred in two big down days, Wednesday and Thursday. Rarely in a bull market do we experience more than two big down days in a row. That’s what happened this week, with a solid rise on Friday. The Index finished back above the 50-Day EMA after bouncing off horizontal support late on Thursday.

While the broad market index (XJO) remains bullish, the largest sector in the market, Financials XXJ, sustained substantial technical damage, falling -3% for the week. Here’s the XXJ chart:

XXJ seems to be finding support at horizontal support. It is very oversold with RSI <30 and Stochastic <10. We may see a rebound in the coming week, but that is probably all it will be.

Only two sectors were positive this week, Consumer Discretionary XDJ +1.34% and Consumer Staples XSJ also up +1.34%.

I listened to ABC Insiders this morning where Fran Jones debated with the Treasurer about the state of the economy. The Treasurer, naturally, defended the actions of the government on economic management and held out a variety of economic measures as proof of the government’s positive activity. Fran Jones countered with several sets of figures including those that showed consumers are not spending. The stock market tends to be forward looking and the two consumer sectors are both doing well. It could be a good Xmas for some of the retailers.

Here’s the daily chart for Consumer Discretionary:

XDJ has remained above the 50-Day EMA since August. Any pull-back has bounced nicely off the 50-Day EMA. XDJ is in a strong medium term up trend.

Here’s XSJ:

XSJ was in a sideways consolidation from late August to early November. This month it has performed strongly.

Health XSJ continues to be the strongest sector in the ASX, although not the best performer this week:

XHJ had a consolidation period in September and has continued on its strong up trend since then.

CSL continues to be a stand-out stock.

Here’s the Cumulative Momentum Index for Large Cap Stocks with Low Volatility:

The three stocks with the strongest momentum are CSL, Woolworths and Sydney Airports. Continue to hold those stocks. (Note: because of higher volatility, Miners and Energy stocks are eliminated from this set of stocks.)

Utility stocks (Ausnet and APA) have joined the three big retail banks in the weak section below zero. Avoid those stocks.

Here’s a tabular analysis of sectors, plus Gold Miners and XJO:

The overall health of the market continues strong, despite pockets of weakness, for example, in Financials XXJ. Gold Mining XGD is particularly weak with a Momentum rating even worse than Financials. Avoid the Gold Miners until we see a turn-around in that industry group.

In ETFs, continue to hold the two international ETFs, IOO and IEM.

IOO (International shares with a strong bias to the U.S.) and IEM (Emerging Markets) have, by far, the strongest momentum of the ETFs I follow. Gold and Bonds (IAF), with poor correlation to XJO, are likely to come into play if we get a bear market.