Thought for the Week: "I’ve missed more than 9000 shots in my career. I’ve lost almost 300 games. 26 times I’ve been trusted to take the game winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed." –Michael Jordan
WEEKLY REPORT.
This is an abbreviated report this week as I am leaving for overseas on Monday for six weeks. Besides getting ready for the trip I also have some family commitments over the weekend.
This week’s report will concentrate on the Australian market.
AUSTRALIAN MARKET: INDICES ONE-WEEK PERFORMANCE
XAO: down -0.3%. Three of ten S&P Indices were up.
S&P Indices Performance – best to worst: 1.Info Tech: +1.13% 2.Health: +1% 3.Financials.: +0.69% 4.Telecoms: -0.06% 5.Cons.Discretionary: -0.13% 6.Materials: -1.09% 7.Utilities: -1.51% 8.Industrials: -1.7% 9.Consumer Staples: -2.15% 10.Energy.: -2.47%
Other Indices: 1.Property: -0,51% 2.Financials (Ex Property): +0.88% 3.50 Leaders: -0.12% 4.Small Ordinaries: -1.61% 5.Mid-Cap 50: -0.88% 6.Metals and Mining: -1.32 % 7.Gold Miners: -6.34%
I used to take Small Ordinaries as some sort of a guide to the overall health of the market, but that’s been distorted lately by the influence of Gold Miners. Its effectiveness has been lost. So I’ve switched over to looking more to the Mid-Caps. The Large Caps (50 Leaders) and, to a lesser extent, the XAO are too influenced by the Four Big Banks. So the Mid-Cap 50 (the lower half of the ASX100) provides a better guide. Once again this week, XMD underperformed. This is a bearish sign. It’s not a timing device – just something to note.
AUSTRALIAN MARKET: INDICES ONE-MONTH PERFORMANCE
All ten SP Sectors were down. XAO down -1.96%.
S&P Indices Performance – best to worst: 1.Health: -0.44% 2.Materials: -0.73% 3.Info.Tech: -1.37% 4.Cons.Disc.: -1.38% 5.Financials: -1.53% 6.Telecoms: -2.57% 7.Cons.Staples: -2.85% 8.Utilities: -3.12% 9.Industrials: -3.57% 10.Energy: -6.3% 11.Consumer Staples: -2.15%
Other Indices: 1.Property: -2.76% 2.Financials (Ex Property): -1.33% 3.50 Leaders: -1.72% 4.Small Ordinaries: -5.31% 5.Mid-Cap 50: -1.61% 6.Metals and Mining: -1,91 % 7.Gold Miners: -22.4%
A poor performance for November, down nearly 2%. November is historically one of the better months of the year. I warned at the beginning of the month that it was likely to be poor.
AUSTRALIAN MARKET: MONTHLY CHART – XJO
The Index is down -1.94% for November. The Index is currently 5320. November is now complete. The monthly candle is an “inside” candle – inside the range of the previous month. That suggests indecision – but a slight bearish bias.
The extent in time of this bull market 2009-2013 now almost exactly matches the 2003-2007 bull market, but the rise has been much less in value. (Some theorists would say that the current move up is not a bull market, but a counter-cyclical rally in a bear market. Does it matter? Probably not much to the average investor.) Anyway, if the market rhymes, we should be looking at a sizeable pull back sometime in the near future.
Indicators are currently flashing warning signals. RSI, CCI, MACD Histogram and Stochastic are all showing negative divergences. These are most obvious on the RSI, Histogram and CCI. Time can work those off. Until we see a drop in the market, these divergences are merely showing a slowing in momentum. Momentum has to slow before the market can turn down, but a slowing in momentum doesn’t necessarily imply a turn in the market.
RSI has now dropped below 70 – that’s a warning signal. CCI and Stochastic are both overbought and dropping. Histogram has dropped this month. Care needs to be taken.
November-April are considered the best six months of the year. November and December are usually two of the best months of the year. It should be remembered that the GFC bust began with a fall in November. The market was then down for five months in a row. So there’s never any banking that history will repeat. Each situation must be assessed on its merits, At this stage, long term bulls won’t be worried. They would see the set-back in November as a glitch. But if the rising (bearish wedge on the chart is broken to the downside – watch out.
AUSTRALIAN MARKET: WEEKLY CHART – XJO
The XJO finished at 5320, down this week, -0.27%.
Indicators: 1.MACD Histogram. Marginally above zero, and falling. 2.MACD. Major negative divergence. 3. RSI.9 is at 58.7. Double top. Negative. 4.Stochastic. 74.6. Below 80. Negative. 5.CCI.14: +42.4. Falling below +100. Negative.
Indicators are steadily becoming more bearish. A break by the MACD Histogram below the zero line would be a big negative. Long term bulls will be looking for support at the 30-Week MA and major support just below 5000. That’s plenty of downside room to move.
AUSTRALIAN MARKET: DAILY CHART – XJO
The XJO finished at 5320.
Indicators: 1.MACD Histogram. Below Zero. Negative. 2.MACD. Below zero. Negative. 3.RSI.9 is at 42.2. Negative. 4.Stochastic. 29.6. Below its signal line. Negative. 5.CCI.14: -80.5. Negative.
The Index is in a short term down trend but off its recent lows. It could be turning around. Indicators are off their oversold readings of a week ago.
At this stage, the long-term trend is in jeopardy. Bears need to see a break below the pivot of Friday, 22 November. Long term bulls won’t be too worried until the 5000 barrier is broken. At this stage I’m neutral but the evidence is biassed to the downside. The Daily MACD has had a marginal break below the zero line. Any further downside movement would confirm that bearish indicator.
Conclusion
The long term trend is up. The short term trend is down. At this stage – I’m neutral. Seasonal factors favour a turn around in the next week or so and Santa could be coming once again. Just don’t bet on it. It didn’t happen in 2007. And January 2008 was a horror. Watch the charts – and remember, the Stunned Mullet approach to a fall in the market won’t save your bank balance.
That’s it from me for this year. I’ll be incommunicado until mid-January.
Thanks to all those who have sent me such kind comments during the year.
To all of you – I hope you’ve had a great year and looking forward to enjoying the Festive Season. Best wishes for 2014.
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