Vanilla XJO Thread, page-475

31/5/25. ASX Weekly Wrap. Market remains bullish.

STW weekly chart.

STW up this week +0.87%. XJO up +0.88%

STW remains in a strong up-trend and approaching the all time highs.

STW Daily Chart.

STW remains in a strong up trend. Volume and range increased a little this week. Wednesday, on heavy volume and an intra-day reversion, looked ominous, but the index has consolidated in the zone.

Stay with the trend until it clearly changes to the downside.

Relative Strength, Market/Sectors.

The above chart shows the STW and in the lower panels are 20-Day Hull Moving Average.

The Hull MA20 gives a similar reading to a 5-Day EMA (used last week), but the Hull MA gives a smoother curve than the 5-Day EMA.

If the RS line is falling (blue), it means that the sector is doing better than the broad market. If the line is rising (yellow), the sector is doing worse than the broad market. If the line is flat - then the sector is doing about as well as the broad market, i.e., neutral in relation to the broad market. The distance from the zero line indicates the strength of the difference between the sector and the ASX200 (XJO).

The lower the number of the Relative Strength - the stronger is the trend of the sector against the broad market.

The sectors can then be ranked strongest to weakest:

1. Technology (XIJ) -1.17
2. Gold Miners -0.41
3. Communications (XTJ) -0.19
4. Financials (XXJ) -0.13
5. Property (XPJ) -0.1
6. Energy -0.07
7. Industrials (XNJ) 0.03
8. Discretionary 0.05
9. Health 0.17
10. Materials 0.28
11. Staples 0.35
12. Utilities 0.54

Defensive Sectors (Health, Staples and Utilities) are ranked 9, 11 and 12. The top seven Sectors (out of 11) plus Gold Minersare all cyclical sectors. This remains a risk-on market. (Note. The above is based on performance over the past 50 days.)

Cumulative NewHighs-NewLows.

Cumulative NewHighs-NewLows is in a strong up-trend - it broke above the 10-dma in mid-April.

This chart if of particular use to long term investors. It is less prone to whip-saws which plague the broader market indices. While the chart is above the 10-dma, then it's best to remain bullish.

Australian VIX

VIX is an measure of how the market thinks of forward Volatility. If Volatility is dropping, the market is expecting a more benign context for stocks. If Volatility is rising, the market is expecting a more dangerous context for stocks.

It is also often referred to by Contrarians. If the VIX is very low compared to recent history, then Contrarians might think that complacency has entered the market, and is vulnerable of an unexpected shock.

VIX is currently the lowest it has been in the past three months. Despite all the apparent chaos being created by Trump with on again, off again tariffs, investors are quite complacent about the state of the stock market. That can conitnue for some time - but makes the market vulnerable.

After a brief kick up on the 9 May, Vix has been steadinly dropping until 22 May (Thursday). It has since settled back a little on Friday, and moving averates are sidways. This is a period of indecision where the market could become more benign or more dangerous.

Stocks/Bonds Ratio.

Bond traders are usually considered much more savvy than stock traders who tend to be influenced more by emotions (Fear of Missing Out) than Bond traders who tend to be more rational.

Here's a chart of the Ratio of Stocks/Bonds (XJO/IAF).

In a bullish market, stocks tend to do better than bonds. In a bearish market, bonds tend to do better than stocks.

Since mid-April, stocks were doing better than bonds - bullish stock market. But that changed this week, with stocks and bonds in equilibrium. That could signal switch in market sentiment. Nothing definitive yet - but something to watch is stocks begin to worsen against bonds.

Conclusion.

1. The market remains bullish although but volume and range have increased. Those features often occur before a turn-aroung in the market.
2. NewHighs-NewLows Cumulative remains bullish.
3. Sector analysis shows that cyclical sectors are doing much better than defensive sectors (erxcept for Materials). That's bullish, a risk-on market..
4. VIX is at its lowest in the past three months. That's indicative of a bullish market, but may also indicate that investors may be a little too complacent.

The trend of the ASX remains up - stay with the trend until it has clearly turned down

Take care.
RB