Sunday Smorgasbord. Weekly Report, week ending 3 March, 2017...

Sunday Smorgasbord. Weekly Report, week ending 3 March, 2017

CONTENTS

• XJO Charts, Daily, Weekly, Monthly.
• Internals - Australian Market.
• Sector Watch
  • Sector Momentum
  • Weekly Change
  • Sector Charts
• Summing Up.

XJO Charts, Daily, Weekly, Monthly

XJO Daily:



The Daily Chart represents the short term trend. It has failed at resistance in mid-February and has now tested support of the pivot of 27 January. So far, that has held.

On Wednesday/Thursday, XJO bounced strongly off the 65-Day MA. Friday gave back a good chunk of those gains and the Index is once again testing support.

Overhead resistance is represented by the 13-Day MA. Plenty of support lies below. There's a good chance that nearby support will hold.

If not, Major Horizontal Support (5587) should hold and provide us with a wide sideways trading range.

XJO Weekly:



XJO down marginally this week, -0.16% this week. The medium term up trend channel remains intact.
The Short Term Stochastic (14.3.5) has broken below the Long Term Stochastic (50.10.10). When that has happened in the past, we've seen at least a short term pull-back.

Negative divergence on the CCI suggests a period of down side movement.

That's confirmed by a negative divergence on the MACD Histogram.

XJO Monthly:




So far this month, we've only had three days of trading. The XJO is up +0.3% but that figure is meaningless so early in the month.

Indicators are all pointing up so the very long term trend is in no real danger of changing to the down side.

The big concern is the very long term oblique down trend line from the 2007 high. A big pullback from that resistance level would suggest further downside.

The three time frames are no longer in sync. The Daily XJO is currently sideways and below its 13-Day MA. XJO in the Weekly and Monthly time frames remain above their respective 13 MAs. At this stage, medium to long-term investors are in no real danger. It is probably still a buy-the-dips scenario.

INTERNALS - AUSTRALIAN MARKET.

XJO was down marginally this week. That should result in small losses on the Internals (DMX Histogram and 200-Day MA)

Looking at my short-term momentum indicator (DMX Histogram), in the previous week 54.1% of stocks from the ASX100 were positive on the DMX Histogram. This week 56.2% of stocks are positive on the
DMX Histogram. That's a small improvement on the expected result.

A drop below the 50% level would suggest a short term bearish trend.

Looking at a longer term indicator (Stocks Above/Below 200 DMA), in the previous week 61% of stocks on the ASX100 were above the 200-Day MA. That rose marginally this week, with 63% of stocks above their 200-Day MA. Again that's a small improvement on the expected result.

Those positive differences are marginally, but better big negative differences which would suggest major internal weakness.

SECTOR WATCH

Sector Momentum


This section compares the performance of each sector against the XJO over a 20-Week period. It shows relativities not absolutes.

Here's the previous week's momentum chart (as at 17 February):



Here's this week's Momentum Chart.



We now might have a market in transition. Materials (XMJ) continues to weaken, and is in third place behind Utilities (XUJ) and Financials X-Property (XXJ). The big improver is Health (XHJ) which is just below the zero line. Consumer Discretionary has also improved considerably this week. Property is also clearly improving.

Gold Miners weakened considerably in the past week.

SECTORS - WEEKLY CHANGE



Utilities and Health were the two best performers this week. This could be the start of a major sector rotation with cyclicals like Materials and Energy losing out to defensives like Utilities and Health.

SECTOR CHARTS (Daily)

XMJ (Materials)



It may be too soon to count Materials out.

XMJ is now down to the lower support level of the Standard Error Channel and the short term Stochastic is into the "Buy Zone" and rising. Watch for a rebound.

XMJ remains in a strong up trend. If the 13-Day MA crosses below the 65-Day MA then this trend is probably over. It's had a great run for over a year, so some sort of pull-back wouldn't surprise. Watch.

The strongest stocks in XMJ by far are BSL and AWC. Rio looks the best of the big miners.

They might be worth a look - use technical analysis for entry and exit.

XEJ (Energy):



XEJ is in a down trend and has completed a Head and Shoulders bearish reversal pattern.

The bottom pane which shows its relative performance against the XJO is clearly in a down trend. Better options now exist for trading than the Energy Sector.

It might now be oversold, but this is now probably a case of "sell the rallies".

3. XXJ Financials X-Property:



XXJ rose this week +0.46%, and performed better than the XJO.

It remains above the 13-Day MA which is a plus.

The strongest stock by far is QBE, followed by CGF. The big four banks are improving, with CBA the best of them.

XUJ Utilities



XUJ moved into an up trend in late November. It had a consolidation period in January, then took off again. It is relatively strong against the XJO and is now the strongest sector in our market.

This week it bounced off horizontal support. Expect a test of overhead resistance.

The strongest stock is Ausnet and pays a dividend of 5.3% fully franked.

XNJ Industrials



XNJ doesn't have a lot to commend it. It is in a long term down trend compared to the XJO.

The two best stocks are Downer EDI and Cimic. Neither, however, is especially strong.

XSJ Consumer Staples



Since the beginning of December, Relative Strength of XSJ compared to XJO has been slowly improving.
It recently hit the top of the Standard Error Channel and has now been in a process of mean reversion.
This now probably presents as a buying opportunity.

CCL is the strongest stock.

Just be careful when considering Consumer Staples stocks. The sector has a habit of performing relatively strongly, then being smacked down.

XHJ Health




Health has been improving its relative strength rating against the XJO since December, 2016. (See bottom panel.)

It's been fairly volatile, hitting the top of its Standard Error Channel then engaging in mean reversion to provide a buying opportunity. It is now providing another such opportunity.

The two strongest stocks are CSL and RMD.

XPJ Property



The bottom pane shows a tendency for XPJ to plateau against the XJO and then drop. That's not a healthy condition. Since November it is trending sideways, more or less in line with action in the XJO. It remains below its 200-Day MA. So there's not a lot to recommend it.

The two strongest stocks are GMG and LLC. The market got a bit excited about LLC on Monday after its report, but, as we've seen with a lot of stocks (e.g. JBH) has since been smacked down. Until the Sector as a whole sees improvement, I think better opportunities exist elsewhere.

XGD Gold Miners



The Relative Strength panel shows a sharp turn down this week when compared to the XJO.

Gold benefits from a weak U.S. Dollar, and deteriorates when the U.S.$ improves. This week a lot of attention has been paid to the upcoming FOMC meeting in mid-March, when the expectation is that interest rates in America will rise. That should have the effect of strengthening the U.S.$, much against the best wished of The Don.

So Gold Miners were hit hard this week.

Leave the Industry alone until we see some definite improvement.

XDJ - Consumer Discretionary.



XDJ is one of the weakest sector in our market. There's not much to recommend it. Traders can make money on the ups and downs but longer term investors are best to leave the sector alone.

XTJ Telecoms.



Leave this sector alone until we see definite improvement.

At the moment it is in the ICU along with Discretionaries.

Summing Up:

The XJO fell marginally this week, and is now testing support. If that fails we'll probably see a test of the next level of support around 5580. It is currently at 5739

The market seems to be in transition, but it might still be too early to say for sure.

If we get further weakness in Materials (XMJ) then that opinion will be further strengthened. With the prospect of a stronger U.S.$, prices for industrial metals will struggle and that will put a brake on our miners.

Technically XMJ looks like it's ready for a bounce. How strong it bounces will determine the future of our miners.

With the prospect of a market in transition, risk is increasing for investors. It might pay to re-assess portfolios of stocks and be prepared to sell some winners and look to invest in some of the improvers.

If our market does fall through current support levels, I think the Major Horizontal Support level around 5580 should hold and provide another buying opportunity.

RB