Australian Market. XJO - Monthly, Weekly, Daily Charts.
ASX 100 - Stock Ratings
Top Ten Stocks
American Market, Risk-On or Risk-Off?
Summing up.
AUSTRALIAN MARKET: SECTOR PERFORMANCES IN THE PAST WEEK.
XAO flat -0.02%.
Seven out of ten Sectors were up. Energy up +2.94%. Consumer Staples up +2.1% after a very good performance by Treasury Wines +12.02%. Worst two were Health -3.18% and Industrials -0.94%. Health was hurt by a poor performance by CSL -7.39%. Financials were hurt by some poor showings especially in the Insurers, AMP -5.56% and QBE -10.87%. CBA -3.37% didn't help the cause of the Financials. All of those extreme results in selected stocks were due to market reactions to their Reports.
Energy looks like it might have finally moved into a convincing up trend. Materials are also looking good; XMJ set a new 52-Week High this week. The miners have been a drag on our market since 2011, but this week two made new 52-Week highs, FMG and S32.
This week 19 Stocks made New 52-Week Highs amongst the top 100 stocks. The previous week only 10 Stocks from the ASX100 made New 52-Week Highs. That's a solid improvement on the previous week.
87.9% of ASX100 Stocks are above their 200-Day Moving Averages. That's the same as the previous week. This is a measure of the long-term trend in the market. Currently it remains bullish. In fact, that may be too bullish. That's an exceptional reading for stocks above the 200-Day MA.
65.7% of ASX100 stocks are positive on the short term trend measurement indicator, DPO. That's a small decrease on the previous week, but still a bullish reading.
XJO, Monthly, Weekly, Daily Charts.
Monthly Chart:
We're now into the third week of August. This month, so far, has been a narrow range month with little movement in the Index, -0.64%. Indicators remain positive, but we need to see how the rest of the month pans out.
Weekly Chart:
XJO flat this week -0.08%.
The medium term uptrend is up, but stalling at horizontal resistance.
Major indicators still don't show negative divergences which usually come before a down turn. Short term Stochastic (14.3.5) is overbought but the long term Stochastic (50.10.10) still hasn't reached overbought levels. Any pull-back is likely to be bought.
Daily Chart:
Short term Stochastic (14.3.5) is below its mid-line. CCI is now below its zero line, that's a bearish result. DPO remains above zero. A break below zero by the DPO would confirm the bearish reading on the CCI.
The chart is hovering at horizontal resistance and the 20-Day MA.
Any pull-back is likely to be bought.
Given the extreme reading by the number of ASX100 stocks above the 200-Day MA, it is likely that we'll see a pull-back to take the heat out of this market.
ASX 100 - STOCK RATINGS.
Momentum is one of those anomalies which throws doubt on the Random Walk Theory of Stock Markets.
As a general rule, avoid stocks in the weakest sectors, and look to stocks in the strongest sectors. (There are always exceptions.)
The following charts show the stocks from the ASX100 in each of the ten sectors. Relative Strength is a blunt instrument. Use technical analysis for entry to these stocks.
Remember that the following charts show "relative strength", i.e., strength of the indices and stocks compared to action in the XJO. Bars above the zero line do not necessarily indicate that a stock or index is bullish - only that it is doing better than the XJO.
Utilities.
Utilities was up a little this week, +0.33%
AGL was the stand-out in this sector, but the shine has come off that stock. Two weeks ago its Relative Strength Rating was 0.73; this week it is 0.25. That's a big drop in just one week. AST improved this week. A week ago its relative strength was 0.52. This week it is 0.59. I wouldn't give up on AGL just yet. It had been stretched to the upside, and this might be the pull-back it needed to get some value back into the stock. Watch
This week, no Utilities stocks are on 52-Week Highs.
On current prices, AGL pays a dividend of 3.7%. Other Dividends are: APA 4.4%, AST 5.1%, DUE 6.9%, SKI 4.9%. These are tempting dividends, but until we see a return to favour in the Utilities it might be wise to keep your powder dry.
Industrials:
The Industrials Sector is home to some of the better performing stocks on the ASX100. Aristocrat Leisure is the standout, Relative Rating 1.17.
Blackmores looks good but that's due to a great performance early in the year. Blackmores is now below its 200-Day MA, so ignore it.
Seek (SEK) and Brambles (BXB) are the next best. Neither pays particularly enticing dividends.
Downer EDI made a 52-Week High this week. Anything making a new 52-Week high is worth thinking about. It pays a Dividend of 4.4%. TCL pays 4.1% and SYD pays 3.8%.
Materials:
Materials was up +1.69% this week. On the ratings scale it is now well above zero and has been performing well in recent weeks.
The two best performers now includes one Miner, S32 up this week +2.51% and set a new 52-Week High. Bluescope Steel continues to be the standout, up this week +4.04%. James Hardie and FMG continue to perform well.
FMG, S32 and ORA made 52-Week highs this week.
On current pricing, ABC pays 3.9%. None of the top performing miners pays a good dividend. Amcor pays 3.4% and Orora, which set a new 52-Week High this week, pays 3.2%.
Financials X-Property:
XXJ is one of the worst performing sectors on a one year basis. The four big banks are all on the negative side of the ledger. Forget about the big banks until we see some solid improvement.
CGF is the best performing stock and pays a dividend of 3.7%. CGF is a fund manager.
CGF and IAG made new 52-Week High this week. IAG has a dividend yield of 5.4%.
The banks all pay healthy dividends, but until we see a turn around in their prices, the risk is a bit too high. No stocks from the Financials X-PTY make it into my Top Ten Stocks.
Health and Information Technology:
Health remains the best performing Index. Cochlear is the standout. SHL set a new 52-Week High this week. CSL has been very disappointing, down this week -7.39%. It's now down to a major support level. If it can regain upside momentum here, it could be OK. Watch.
Carsales.com (CAR) is clearly a standout in Info.Tech. Dividend Yield 2.9%. It set a new 52-Week High this week. CPU has just come off a 52-Week Low. Avoid.
Consumer Staples:
TWE is one of the best performers in the ASX100 on a 1-year basis. It returned to favour this week with an exceptional rise of +12.02%
WES is still the pick of the two big retailers, if you must have one in your portfolio. Wesfarmers yield is 4.6%. WES has been in a wide trading range for most of the past year. It seems now to be on a down move within that trading range. If you're a dividend hunter, it might pay to wait and try to buy at a lower figure.
Woolworths seems to have turned around. It was up this week +2.4%. So we might have seen the worst for Woolworths. It is currently above its 200-Day MA.
WOW Dividend is 4.6%. That puts it on a par with WES as far as dividends is concerned.
Consumer Discretionary and Telecomms.
Consumer Discretionary made a new 52-Week High this week.
Four stocks stocks made 52-Week Highs: DMP, Crown, Harvey Norman and JB Hi-Fi. Star Entertainment made a 52-WH the previous week, so it looks like the casino stocks are coming back into favour. There is nothing between the two on the ratings.
DMP is the stand-out. It's a growth stock.
JBH pays 3.5%, HVN 4.2%, CWN 4.8%.
Telecomms are interesting. Telstra remains enticing to the dividend hunter: dividend +5.7%. It is now at the lower edge of its up trend channel, so it might be worth a look. It remains a poor performer on a one-year basis.
VOC and TPM are both performing well, but are growth stocks.
Energy.
On a one-year basis, Energy is a dreary sight. It may have now established a new up trend after years in the doldrums. Here's the daily chart for XEJ:
It is likely to test that old resistance level to see if it holds as support. If that occurs, I think the punters might load up on some of the Energy stocks. WPL pays a dividend of 4% and Santos pays 4.1%. Property
Property is an industry group in the Financials Sector, but is worthy of standing alone for analysis. On a one year basis, it is one of the better performers in our market. It has taken a bit of a hit the past couple of weeks and there might be more downside before we see it stabilise. Two stocks, however, made 52-Week Highs this week, MGR and Goodman, so they should stay on the radar.
All stocks in the sector pay dividends better than 3% so are worth a look, with the exception of LLC which is performing poorly.
A cost effective entry to the sector is provided by ETFs such as SLF. According to State Street Global Advisers, the issuer of the ETF, the SLF Dividend Yield is 4.3%. It went ex-dividend on 29 June. Dividends are paid quarterly.
AUSTRALIAN VIX:
VIX, sometimes referred to as the Fear Index, is a measure of expected volatility in the coming month. High Volatility is associated with bearish markets, and Low Volatility with bullish markets. VIX trades inversely to the market. When the market is high - VIX is low.
Currently, VIX is at an extreme low. It can remain so for some time. But, when it starts to rise, it is often a sign that we're entering a bearish phase.
Given that VIX is at an extremely low reading, and Stocks >200 Day MA is at an extreme high reading, we're getting a fairly strong contrarian message to stay away from this market until we get some fear showing up. That doesn't mean that a pull-back is imminent - but it can't be too far away.
TOP TEN STOCKS FOR AUGUST:
The Top Ten Stocks for July returned +10.739% while the XJO rose +6.28%. So far, in the past three months, the Top Ten has consistently and significantly beaten its benchmark, the XJO. The best performer in the Top Ten for July was Bluescope Steel, up +32.65%. The worst performer was Treasury Wines, up +4.55%.
The Top Ten Stocks for August are unchanged from July. The stocks are: TWE, AGL, Cochlear, MGR, DMP, VOC, JHX, BSL, ALL, TPM. I expect some changes next month.
Summing up:
This week was flat and the market has stalled at a strong horizontal resistance level.
The market is overbought and a pull-back is likely. A moderate pull-back of say 5% would add some value to our market which is currently stretched to the upside.
On a more optimistic note, two of the most bearish Sectors (Materials and Energy) are now showing some bullish signs after years of a bearish down trend (since 2011).
It may be significant that while XMJ and XEJ are improving, two of the most risk averse parts of our market (Utilities and Property) have been moving to the downside. Health, another risk averse sector, has also pulled back, mainly due to a fall in CSL.
So we may be seeing rotation out of the risk averse assets into the more risky, cyclical areas of the market, Materials and Energy. This is an exciting development of years of bearishness in those two sectors.
Just remember that we're coming into the worst months seasonally for our market. Caution.
Note: I won't be putting out a regular Weekly Report next weekend as I have some commitments to keep. I'll try to get an up date out at the end of August.
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