Vanilla XJO Thread, page-476

1/6/25. ASX 20 Leaders Weekly Wrap

It was a good week for the 20 Leaders with lots of strong stocks: WTC +7.1%, BXB +5.25%, Woodside 4.06%, Westpac +3.29%, MQG +3.84% and Aristocrat Leisure +2.75.

And, only two very weak stocks: Rea -5%, Rio -3.71%

Daily Chart for VLC (20 Leaders).

VLC was up +0.95% this week compared to 0.88% for the XJO.

The VLC remains in a strong up-trend with WPR at-13.85. Above -40 is bullish where it has been since 17 April.

Plenty of warnings are showing up. Momentum as measured by the MACD Histogram is slowing and Money Flow is now showing a small negative divergence from price. Chande Momentum Oscillator, after hitting the overbought zone gave an early sell signal on 23 May which is still in play. Money Flow is also showing a negative divergence.

Volume has dropped off this week and is very low compared to early April. That's a bit surprising for the end of the week. Most stocks I looked at this weekend showed big volume on Friday - end of thr monyh. But very low volume on the ETF covering the 20 Leaders. Odd.

A bearish rising wedge may be forming on the last few days of the chart. That suggests a move back to the downside. But the formation is relatively small so any pull-back is likely to also be small.

Until the trend clearly changes - stay with the trend.

20 Leaders - One Week Performance

Eleven stocks were up this week and nine stocks down. But some of the positive stocks were very strong as noted above in the opening.

Breadth

The 20-Day EMA provides a reasonable measure of medium term trend. Above - bullish, below - bearish

Three stocks are below their 20-Day EMAs: Fortescue (FMG), REA and Rio. That's an unusually low number of stocks, i.e., that suggests a bullish market. However..........

Five stocks are neutral, i.e., they are sitting at their 20-Day EMAs: ALL, BHP, Coles , WOW and CSl. Those stocks could easily switch into bullish or bearish. If they all switched into bullish, then I would have to consider the market overbought. But - we'll have to wait and see what happens..

That leaves 12 stocks above their 20-Day EMA, that's down one on the previous week: ANZ, BXB, CBA, GMG, MQG, NAB, QBE, TCL, WES, WBC, WTC and WDS.

Still, that shows a picture of relatively robust strength in the 20 Leaders.

A common measure of the long-term trend is the 200-Day EMA. Three stocks are sitting at the 200 (neutral) and four stocks are below
the 200-Day EMA. The four stocks sitting clearly below the 200-DEMA are the three big iron ore miners (BHP, Rio, FMG) and CSL. That tells you that the Chinese connection is a big factor. Weak Chinese market and we have weak iron ore miners. The three "neutral stocks are All, GMG and WOW.

13 Stocks are clearly above the 200-Day EMA: ANZ, BXB, COL, CBA, MQG, NAB, QBE, REA, TCL, WES, WTC, WDS, WOW.

That's a relatively robust picture of the state of the market, That's indicative of the VLC recovering from the long correction earlier in the year.

Note that all four big banks and MQG are bullish in the long term. They make up nearly 30% of the Australian market. While the banks do well, the ASX usually also does well. And, vice versa.

200-Day Rate of Change.

The three strongest stocks in the 20-Leaders over the past 200-Days are: QBE 43.14%, CBA 31.1%, BXB 52.07%.

I came across an interesting system recently based on American data. It was very simple, buy the strongest stocks at the beginning of the month, hold for the rest of the month. Sell only if the stock no longer stays in the "strongest" group. The writer stated that this out-performed the market in the long term.

I'm not recommende this as a system - just posting it for the sake of interest.

I'd make a couple of simple timing adjustments to the system. Buy at the beginning of the month if the stock is above the 20-Day EMA.

That rule currently disqualifies QBE, which fell below the 20-Day EMA on Friday. Buy such a stock if it rises back above the 20-Day MA.

Sell if a stock falls below the 20-Day EMA.

Stocks on Negative Watch:

A negative divergence on MACD Histogram often precedes a fall in the stock. That's a warning sign so it is wise to act if the stock does turn down.

Stocks showing negative divergence on the MACD Histogram this week are: GMG, MQG, NAB, QBE, REA, WTC and WDS.

Conclusion.

20-Leaders VLC is in a strong up-trend but plenty of warning signals are being flashed including a short-term sell signal on Chande Momentum Oscillator. But - stay with the trend until it has clearly turned down.

The media continues to write lots about the chaos being created by Trump's tariff policies. In yesterday's ASX Weekly Wrap, I noted that despite the media scrutiny of Trump's policies, Australian VIX (a measure of traders" expectation of volatility) is surprisingly at a three month low. Traders are quite sanguine about the near-term future for stocks - low volatility, i.e., a bullish market. Of course, they could be wrong.

Remember - Technical Analysis is not a crystal ball - it's more like a wind-sock at an air-port.

That's all for this week.

Take care.
RB