Australian Market. XJO - Monthly, Weekly, Daily Charts.
ASX 100 - Stock Ratings
America - Dow Jones Daily.
Australia, Risk-On or Risk-Off?
Summing up.
AUSTRALIAN MARKET: SECTOR PERFORMANCES IN THE PAST WEEK.
I've added another column to this chart this week. On the right-hand side is IAF. This is an ETF which tracks a Composite Bond Index. Since Bonds provide an clue to the nature of the market (Risk-On or Risk Off), I've decided to include this ETF in this section of the report.
XAO up +4%. One Sector was down, Telecomm -4.63%. All other Sectors were up more than +2%, with Materials the stand-out at +7.7%. Bonds (IAF) were flat, this indicates quite clearly that we had a risk-on market, and we'll stay with that classification until Bonds outperform XAO. This is confirmed by the relatively poor performance of Utilities compared to the Broad Market. XUJ up +2.33%, XAO up +4%.
The XGM (Gold Miners Index) is another indicator of a risk-on market. XGM down -2.02%. Gold tends to be a 'safe-haven' in times of financial stress, but loses its lustre (pardon the pun) when punters are optimistic about stocks.
Despite all the bad news, Five Stocks from the ASX100 made New 52-Week Highs: AGL, AIO (under take-over offers), General Property Trusts, Scentre Group and NCM. Three out of those Five (AGL, GPT, SCG) are interest rate sensitive stocks. That's another indication that in this environment (low interest rates - deflationary) that we're in a Risk-Off market.
Seven stocks made New 52-Week Lows compared to twenty-one the week before. Stocks making New Lows: FXJ, CPU, HGG, BOQ, BEN, AZJ. The Financial Sector produced half of the New Lows.
Five stocks made 52-Week Highs: Domino's (again), SCG, GPT, BSL, CIM. Cimic has had a meteoric rise - I mentioned this stock last week.
48% of ASX100 Stocks are above their 200-Day Moving Averages. That's close to the 50% level.
While Financials continue to underperform, that will have a drag on the XAO's relationship to the 200-Day MA as it is close to 50% of the market. So the % of the ASX!)) stocks above/below the 200-Day MA is a good proxy for the health of the rest of the market. Financials X-Property has 18 stocks in the ASX100. Only five of those are above the 200-Day MA: ASX, CGF, IAG, MFG, MPL. Note - no banks, and only one of the large general insurance companies.
AUSTRALIAN MARKET: XJO - Monthly, Weekly, Daily.
This chart remains in serious danger of falling into major bearish territory. This week saw the monthly candle for February improve. It is now a "hammer" showing buying pressure, but it is still marginally below the major Support/Resistance from 2010/2011. We need another good week coming up to save this from a negative bias. Just 34 points to the upside would do it.
XJO up this week +3.93%. That's not quite enough to recapture all of the big losses from the previous week.
Our market began a bear market in April 2015. So we're getting close to a year since the down trend began. That's a fairly long period of time.
This week three of the four indicators shown nudged up. The only laggard is the slow-moving Long Term Stochastic (50.10.10). The Bollinger Bands on that Indicator are squeezing together. In a down trend, that sort of squeeze doesn't usually last for long because of the heightened volatility. So a big move is coming. Watch this indicator carefully. A move to the upside could spell a solid rally.
The Bullish Falling Wedge has broken to the upside of the restraining line. That's a big positive. There's still a lot of over-head resistance to be climbed. It could be hard going. Friday saw the index fail at the 2010/2011 Support/Resistance line. That's almost at the same level as the 50-Day MA. That's a massive pair of resistances to overcome.
Indicators are not overbought and all in Bullish profiles, so the possibilities for further upside are reasonably strong. We might see some consolidation around these levels before another major move.
ASX 100 - STOCK RATINGS.
These ratings look at the strongest and weakest stocks and sectors in the ASX100. Sectors and Stocks doing better than the XJO should be considered by investors/traders. That's where the money has been going. Remember that these are relative ratings. A stock could still be going down, but going down much more slowly than the XJO so it would have a relatively strong rating. In a bear market, look to defensive stocks with relatively high scores. If a Sector or Stock is positive in the red bars - it is doing better than the XJO over the past 52 Weeks (one year). If the blue bar is positive, the Stock or Sector is doing better than the XJO over the past 52 Days..
Below is a chart showing the relative ratings for the Sectors on a medium term (blue bars) and long term (red bars). The strongest sectors long-term are Utilities, Health and Industrials, with Consumer Staples and Consumer Discretionary not far behind the Industrials. The blue bars (medium-term) are starting to show some important changes. Materials is the strongest sector. I've mentioned a couple of times recently that the Miners are the only place to be for traders. This may, of course, just be a counter-trend rally in the Miners. Time will tell. But they have been in a secular bear market for nearly five years. It's not unusual for secular bear markets to last seven or more years, but this one is still getting long in the tooth. We could be on the cusp of a change in this secular bear market.
Note that the Fifty-Leaders continues to lag Mid-Cap 50 and Small Ordinaries, on both a long-term and medium-term view. That's largely an artefact of the underperformance of the banks and insurers.
As a general rule, avoid stocks in the weakest sectors, and look to stocks in the strongest sectors. There are always exceptions.
To Make the Stock Ratings Charts more useable, I've grouped stocks according to Sectors. Ratings for all sectors and all stocks in the ASX100 are provided. These are all based on relative performance compared to the XJO. Red bars are based on one year performances, and blue bars on 52 day performances. In each chart, the Sector Rating is the first set, then the stocks in the sector in alphabetical order.
Utilities.
Every stock in this sector is performing creditably, but AGL is the standout performer.Strong stocks tend to go on from strength to strength (until they don't). AGL was up +2.47% this week but underperformed the broad market indices.
Industrials.
For the second week in a row, CIMIC was the top-rated stock in this sector. Other good performers are Aristocrat Leisure, Qantas, Sydney Airports and Transurban. AIO is affected by take-0ver offers - leave it for the specialists in that area.
Here's the CIMIC chart:
Cimic has had a meteoric rise. Friday's candle is a "smoke-stack" - that suggests the run could have ended for the time being. But clearly the market has re-rated CIMIC. It looks like a buy on any reasonable pull-back. A successful test of the November, 2015 high would look a likely place.
Materials.
Bluescope Steel is now one of the best performing stocks on the ASX100. It has now surpassed NCM in the ratings. The building materials stocks are generally performing well.
Medium term a lot of the miners are doing well, but this could just be a bear-market rally.
FMG is the best of the big miners. It's chart is looking bullish:
FMG has formed an Inverse Head and Shoulders pattern. It finished Friday just above the 200-Day MA. The standard measure rule suggests this could go up nearly to the high of October, 2015. That's in the high 2.50s. FMG finished Friday at 1.99. A successful test of the neckline of the H/n/S (about 1.90) should confirm the Bullish pattern.
Financials X-Property.
There's not much to recommend this sector.
The fund managers (CGF, HGG, MFG) have had a fall from grace as the correction has proceeded. In times of financial stress, punters pull their holdings out of their funds and go to cash. This makes the fund managers very sensitive to the investing cycles. If we're about to enter an up-phase (likely), then these stocks could recover quickly and the recent falls could just be counter-trend corrections.
Banks and General Insurers, apart from IAG, are performing poorly.
I've been saying for a couple of weeks that I was optimistic about AMP. It's medium-term bar (blue) nudged into positive territory this week. Watch.
About the only stock showing strength is Medibank Private.
Health and Information Technology
COH recently made it into the +$100 club, displanting CSL as the top stock in the Health Sector. CSL is underperforming the XJO. That doesn't make it a dog - but there may be better options at this time.
The big mover this week was Primary Health Care. PRY up +32.41% this week. It's bear trend now seems to be over. It is still a long way below its 200-Day MA, so I'd be careful about punting on this.
Consumer Staples.
TWE is the standout in the Consumer Staples.
If you must have a big retailer from this sector - then Wesfarmers is the clear choice over Woolworths.
Energy.
Energy is improving. The blue bar for Energy is above the zero line and there is a big gap between the medium-term and long-term performers. The best performer is Oil Search. The blue bars provide a little bit of hope for the primary producers in this sector, but it is probably signifiying a brief respite in the on-going bear market. But - you never know. This is worth watching
Looking at the charts of some of the energy stocks, they seem to be under accumulation - particularly OSH, WPL, Santos, Origin.
Here's the Origin Chart:
A strong divergence exists between the Accum/Dist chart (lower panel) and the stock chart. Origin has been one of the worst performerts in the ASX100. That could be coming to an end. It is close to forming a double bottom. A move above 4.26 would confirm. A break by the 20-Day MA above the 50-Day MA would be another positive. Just be careful. This is still a long way below it's 200-Day MA, so any upside move could be a counter-trend rally.
Consumer Discretionary and Telecomm.
Consumer Discretionary has plenty of solid performers. DMP has a big rise this week (+19.02%) after a positive report. It's been one of the best performers in the ASX100.
Last week I said: Domino's Pizza was one of the best performers in the ASX100. The past two weeks saw its share price fall. It could become a buy opportunity at these levels. Watch for a bounce.
JBH and SGR are just off their recent highs. They could represent buying in this pull-back.
Telecomm. TLS performed poorly this week -5.21%. It was one of the worst performers amongst the blue chips this week. It remains below the 200-Day MA. It has to get above that to be considered as an investing opportunity.
AMERICA - Dow Jones Daily.
Here's the Daily Chart for the Dow Jones Industrial Average
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Australian Bonds/Stocks Ratio. Risk-On or Risk-Off?
For this chart I use the IAF (composite bonds index ETF) as a proxy for bonds, and STW (tracking ETF for the XJO) as a proxy for stocks.
We can see the extreme volatility which has existed recently. The Ratio Bonds/Stocks went into a sky-rocket move and like all sky-rockets is now falling back to earth. The 5-Day MA has crossed below the 20-Day MA for the first time since November, 2015. Apart from a marginal move in mid-2015, the Ratio has remained above the 50-Day MA for the past year. A fall below that would be very bullish for stocks. This is looking very bullish for stocks in the medium term. A break below the 50-Day MA would be a strong Risk-On signal.
Summing up:
The Australian market had a strong week this week, up around +4%. Miners have been showing some strength for a couple of weeks, and the Energy Sector now seems to be following suit. The Banks and the General Insurers (with the exception of IAG) have been a drag on the market.
The American market is also showing signs of a possible end to this bear correction. A completion of the nascent double bottom on the Dow Jones Industrial Average would be a positive.
There are signs that our market is taking on a RISK-ON PROFILE. While still strong, Utilities has underperformed the broad market this week. Bonds compared to stocks have also underperformed this week. Those are signs that we're in a Risk-On environment. That can change quickly. It doesn't mean you can be complacent about this market. It is still below the 200-Day MA, and many of the Financials are not performing well. But there are plenty of stocks doing well. This week two standouts were Bluescope Steel and Cimic. The old outstanding stock, Domino's had a resurgence this week. Primary Health Care also had a stunning reversal in its fortunes. It's been a dog for a long time.
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