Weekend Charting and Chat, page-4

This week the XJO fell, down -0.72%. The main factor behind that was a big fall in Financials (XXJ), -3.51%. XXJ is by far the largest sector in our market, so the rest of the market did relatively well to record a fall of -0.72%. XXJ was well over-bought in the previous week so some sort of a pull-back was not unexpected. But - on Monday the Hayne Report on the financial industry will be revealed - and that has also been a factor pulling down the XXJ. Plenty of pessimistic sentiment surrounds that Report - so this might be a case of "sell the rumour, buy the fact".

On the plus side, Materials (XMJ, +5.12%) was affected by a big rise in Iron Ore prices resulting from the closure of Vale's operations in Brazil after a disastrous dam collapse. Also affecting XMJ was a big rise in Gold Prices. Gold Miners (XGD up +7.3%.

This week I'm going to look at charts for the broad market, then look at the four big banks and the three big iron ore miners.

STW Daily.  (Tracking ETF for the XJO)

This week STW has been consolidating under the 200-Day EMA, that's often considered the line demarcating bull/bear markets. That's a negative.

The STW is also at the top of the descending Standard Error Channel. That usually results in a pull-back. Negative divergences exist on TSI and MFI. The short-term Stochastic has crossed negatively below the long-term Stochastic.

The negatives are piling up, and suggest we'll see downside in the broad market.

Four Big Banks:

CBA.

ANZ:

NAB:

WBC:

All four big banks were over-bought in the week before the current week. They are all now oversold based on the Short-Term Stochastic.

Friday saw some intra-day nibbling at the share price in all four banks. That suggests that some bottom feeders were getting in early for a relief rally in the banks on Monday. Given the oversold nature of the stocks, that may have been a good strategy. I'd prefer to wait and see what happens on Monday and Tuesday. But a relief rally may not be far off. Wait.

Three Big Iron Ore Miners.

BHP

RIO TINTO

FMG

FMG is rising exponentially. Such exponential rises are unsustainable but can continue on for longer than we expect. Eventually, they fall back to earth. FMG got a double whammy from the Vale events and a report showing an improvement in the quality of their iron ore exports.

The consequences from the Vale events are clear in the BHP and Rio charts. Both are now mildly overbought and sitting at major horizontal resistance levels. Chasing these is now a recipe for disaster. There could be in in these, but sometime in the next week I'd expect a pull-back in the big iron ore miners.