Vanilla XJO Thread, page-510

8/6/25. ASX Weekly Wrap. Trend remains up.

XJO up this week +0.96%. STW up +1%.

The trend remains up since it clearly turned bullish on 10 April.

The chart bottomed on 7 April.

It is now 41 trading days since the market bottomed out. That's significant. Traders often look for major turning points at around the 40 Day mark.

There's nothing obvious in this chart to suggest a turning point, but note that volume on Friday was the highest since 10 April, when the chart clearly became bullish. It was on that date that the Hull MA20 changed from blue to yellow (bearish to bullish).

MACD Histogram shows a big negative divergence which indicates that momentum has slowed. Momentum has to slow before the market can turn down.

RSI has now reached into the over=bought zone above 70.

Time, momentum and volume are currently showing warnings for the ASX. So we have plenty of warning signs that the market is ready to turn down. It hasn't do so ... yet.

Relative Strength, Market/Sectors.

The above chart shows the STW and in the lower panels are 9-Day Hull Moving Average.

The Hull 9 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.

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

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).

Any sector where the Mansfield Relative Strength (MRS) is below Zero that sectort is doing better than the XJO. Or, to put it the other way, if the the MRS is below zero, then XJO is doing worse than the sector.

The sectors can then be ranked strongest to weakest:

1. Technology (XIJ) -1.01. Outperforming
2. Gold Miners -0.37. Outperforming
3. Financials (XXJ) -0.24. Outperforming.
4. Energy -0.19. Outperforming.
5. Property (XPJ) -0.11. Outperforming
6. Communications (XTJ) -0.05. Outperforming.
7. Industrials (XNJ) 0.05. Underperforming.
8. Discretionary 0.16. Underperforming.
9. Materials 0.32. Underperforming.
10. Health 0.37. Underperforming.
11. Staples 0.38. Underperforming.
12. Bonds 0.47. Underperforming.
13. Utilities 0.48. Underperforming.

Defensive Sectors (Health, Staples and Utilities) are ranked 10, 11 and 13. Bonds (not a sector but still defensive) is ranked 12. The top eight Sectors (out of 11) plus Gold Miners are all cyclical sectors. This is the profile of a strong risk-on market.

The best performers provide opportunities for further upside in the stocks in those areas: Technology, Gold Miners, Financials, and Energy.

Cumulative NewHighs-NewLows.

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

This chart is 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 (blue line), then it's a reliable signal for long-term investors to stay bullish.

Australian VIX

VIX is a 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 TO 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 continue for some time in that syate - but makes the market vulnerable.

Conclusion.

1. The market remains bullish .
2. NewHighs-NewLows Cumulative remains bullish.
3. Sector analysis shows that cyclical sectors are doing much better than defensive sectors 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
5. Time, volume and momentum are flashing warning signals.

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

ASX is closed on Monday for King's Birthday.

Take care.