Vanilla XJO Thread, page-20

1/1/25. Markets fall on the last day of the year.

In Australia on New Year's Eve.

XJO down -0.92%.

The threat of a major Head/n/Shoulders topping pattern remains.

The problem with reliability of H/n/S patterns is that the break below the base-line nearly always coincides with an oversold condition. RSI is currently at 42 - just above the key level of 40. A quick break down from here would put RSI into the 30s - oversold which could easily see a bounce back to the upside.

RSI on the XJO hasn't been below 40 in over a year. It almost fell below that level on 20 December but quickly recovered. So the 40 RSI does take on significance.

STW - ETF FOR XJO

It's very difficult for retail traders to get current data on volume for the XJO. Why that is, when volume data is essential for reasonable analysis of trading, is a mystery. Big institutions have, of course, access to such data. (Conspiracy theorists can run wild with that one.)

The next best that we lowly retailers can do is look at ETFs where volume data is readily accessible.

We can see that we had a significant volume event on 20 December. That then looked like a climax selling event - shaking out a lot of retailers and resulted in a move back to the upside in the chart (pushed up by institutional buying in that climactic sell-off).

Monday this week also saw a big volume day sell-off. Not as dramatic as 20/12/24, but significant. So we've had two big volume sell-offs in a 5-day trading session. That should be enough to spur an upside move, but we didn't see that yesterday.

This is still a work in progress, but the odds favour a move to the upside here, thus avoiding a H/n/S topping pattern.

Overnight in the U.S.

Dow Jones -0.07%. SP500 -0.43%. Nasdaq -0.9%. Small Caps +0.13%. Banks -0.13%.

The ASX tends to follow the Dow Jones a little more closely than SPX or Nasdaq. So the flat finish on the Dow is something of a plus for the Ozzie market. Also, the Banking Index in America often has an effect on the Ozzie banks. The U.S. Bank Index was also a flat finish - another plus for the ASX.

Dow Jones.

Dow Jones was flat last night, with an inside day candle showing indecision.

DJ had a big sell-off then buy-up 18-20 December. That seemed likely to end the down-trend in the DJ. The chart has come back now to test that zone as support. At this stage it looks like holding.

Watch for a spring back up to the upside in the New Year trading for confirmation.

Santa Rally

There are various definitions of "Santa Rally". The great un-washed tend to think that December represents THE Santa Rally.

Other more savvy investors look to the second half of December as THE Santa Rally.

A stock market rally during the last five trading days of December and the first two trading days of January. The more erudite traders look to Investopedia for a definition. Here's what that has to say:

A Santa Claus rally refers to the sustained increases found in the stock market during the last five trading days of December through the first two trading days of January. Since 1950, during this seven-day trading window, the S&P 500 has gained an average of 1.3% and been positive 79% of the time.

Well, it doesn't matter which definition you want to take - 2024 has so far been a bit of a dud for Santa's Rally.

But - using Investopedia's definition - we have a couple more days to go before Santa hangs up the sleigh and the Elves can jump off the shelf.

Hope you are having a relaxing day today - and another great 2025.

RB