Vanilla XJO Thread, page-583

14/6/25. ASX Weekly Wrap

XJO up this week +0.37%. STW up +0.38%.

The ASX was down three out of five days, with four days showing intra-day selling. The bears have made themselves felt this week.

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 fallen out of the over-bought zone above 70. That's a warning that all is not well with the market.

Hull MA9 has given an initial sell signal. That's a very short-term warning. The Hull MA20 needs to turn bearish and Williams%R fall below -50 to give a viable medium term sell signal.

Momentum is against further upside in the broad market.

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 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 over the past 50 days..

If the RS line is falling (blue), it means that the sector is doing better than the broad market. If the line is rising (brown), 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 over the past 50 days. Or, to put it the other way, if the the MRS is below zero, then XJO is doing worse than the sector over the past fifty days.

A more sensitive measure, i.e. short-term, is to compare the MRS last week to this week. Again - a minus number means that the Sector did better than the XJO. Or, to put it the other way around, a minus number means that the xjo did worse than the sector for this week, and vice versa for a positive number.

Sectors out-performing the XJO this week were(in order):

1. Energy -0.39
2. Gold Miners -0.17
3. Property -0.13
4. Utilities -0.11
5. Discretionary -0.09
6. Materials -0.06

Sectors doing about as well as the XJO

1. Staples
2. Bonds

Sectors under-performing the XJO (in order)

1. Health 0.04
2. Communications 0.051
3. Financials 0.08
4. Technology 0.17
5. Industrials 0.2

Energy and Gold Miners benefitted from the gathering turmoil in the Middle East. But there were distinct improvements in defensivesi, e.g. Utilities, Staples, Bonds and Health. They were all among the worst performers in the previous week. Whether or not the trends from this week continue may depend on further developments in the Middle East.

Cumulative NewHighs-NewLows.

Cumulative NewHighs-NewLows is a lagging indicator which doesn't respond quickly to short-term gyrations in the market. This feature is an advantage for long-term investors who don't want to actively trade the market.

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

Australian VIX

Above is an hourly chart of the Australian VIX Index. 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 in the past couple of days has changed from its down-trend to an up-trend, i.e., the market is expecting higher volatility in the market over the next 30 days. VIX trends inversely to the broad market, i.e., the market is now expecting lower prices over the next thirty days.

This is a dynamic indicator and can change quickly, but the current change in trend is worth noting.

Conclusion.

1. The market remains bullish .
2. NewHighs-NewLows Cumulative remains bullish.
3. Sector analysis shows that defensive sectors have improved this week, plus, the safe have of Gold is attracting more attention from investors.
4. Energy has spiked higher due to escalation of hostilities in the Middle East.
5. The trend in VIX has switched from down to up. VIX was indicating extreme complacency on the part of investors, that has now changed. It still hasn't reached panic levels, but the fear of lower market prices has increased.

The trend of the ASX remains up - but it is time to think tactically about defensive measures.

Take care.
RB