NDX/R2K Ugly. Morning Java, Tuesday, 16 September, 2014
In America:
Nasdaq Composite -1.07%. New York Composite -0.02%. Russell 2000 -1.21%. Dow Industrials +0.26%. SP500 -0.07%.
The Nasdaq was the strongest of these Indices. I mentioned in my Weekly Report that breadth in the Nasdaq was weak – the Index was being held up by a few big stocks. Microsoft is one of those – last night down -0.96%. The weakness in the R2K (Russell 2000) is of concern as this represents the Small Cap segment of the market – so that’s another indication that breadth is weak. The Big Blue Chip Index (Dow 30) was up modestly, while the Large Cap Index (SP500) was more or less flat. Other measures of breadth (besides the small caps) are the NH/NL Ratio on the NYSE and Nasdaq. They were both also very weak. NYSE NH/NL Ratio – 25.5% with New Lows solidly into “panic” sell mode at 79. Nasdaq NH/NL Ratio was also weak, 24.6% with New Lows at 92. Bulls retain some hope in the Blue Chips and Large Caps – both those indices saw solid intra-day buying.
Here’s the SP500 Chart:
On this chart we have two clear patterns. Long term, we have the rising channel, the lower support line aligns more or less with the 100-Day MA. This looks likely to revisit those. Shorter term, we have an expanding wedge. Again – this suggests the market will head lower. RSI.9 still isn’t very oversold – so there’s airspace below for further falls. On the plus side – this is OpEx Week – which is usually bullish. So we might see some upside. Today’s intra-day buying in the Dow 30 and SP500 lends weight to that supposition. We need to see a solid up day tomorrow for this idea to be confirmed. On the SP500 chart, the break below horizontal R/S is marginal. Today’s candle was a mini “hammer” (intra-day support) – so there are a few smarties buying into the current weakness.
Commodities:
CRB Index flat -0.02%, with intra-day buying. Industrial Metals Group -1.07%. Most of the components were down heavily with Aluminium -2% and -1.9%. Going against the trend was Copper flat at 0.00%. That’s an odd figure as Copper Futures down -0.68%. The Copper ETF, which tracks Copper Mining Companies, was down -1.2%. Iron Ore had a beaut +3.2%. That’s the biggest one day rise since March. This looks like the much anticipated counter-trend rally, the Iron Ore price was deeply oversold, so a counter-trend rally is not unexpected. The size of the rise suggests a scramble to cover shorts – so there’s probably more upside to come as momentum kicks in from the short-covering. With fundamental economic data coming out of China continuing to weaken, it’s unlikely that we’ve seen, long-term, the bottom in the iron ore price. The Steel ETF (which tracks companies producing steel) was up just a little +0.19%.
Precious Metals Group +0.27%. GLD +0.22%.
Australian Stocks in NY:
BHP -0.84%. Rio +0.73%. Given the huge rise in the Iron Ore price, it’s surprising that Rio isn’t up more. It looks like the investors in the Miners aren’t too excited by the rise in the Iron Ore price – Mining Investors usually have a better idea of the longer term outlook.
Westpac -1.39%. ANZ -1.19%. ANZ is now down over -7% in the past eight days. Some of that can be attributed to currency weakness – but not all. The move down is now looking extremely oversold, with an RSI.9 reading well below 20. Similar comments can be made about Westpac. Its RSI.9 reading is at 22.7. Not quite as bad as ANZ – but still extremely oversold.
EWA -0.96%. Its RSI.9 reading is at an extra-ordinary 15.7. Money Flow Index has now fallen into the Buy Zone.
Ozzie Dollar more or less flat -0.06%. So the fall in EWA overnight was following the -1% fall in the Australian market yesterday.
After yesterday’s big fall in Australia, I’d expect today to have much less volatility. Nothing in the overnight market has occurred to change that view. Some opportunistic buying might come into the Miners on the back of the Copper figure and the Iron Ore figure – but don’t expect too much. BHP and Rio on the Australian market are both due for a technical bounce – so that might also add to upside pressure.
Redbacka
(20min delay)