Weekend Chat 31/01 - Many Were Played, page-39

Weekly Wrap. Week ending 30/10/20. Market looks dangerous.

XJO was down heavily this week -3.88%.

The XJO fell below the 200-Day MA on Friday.

The Triple Supertrend Lines are all bearish (blue).

RSI(14) is now below 40, which is oversold. It can go lower.

Our market appears to have American Election jitters.

That's not the only worry. No Stimulus package produced in America until after the Election. Some large cap stocks are at ridiculously high P/Es. E.g., Tesla >800. What? It would take you 800 years to pay for an investment in Tesla based on its earnings. Amazon >120. Average P/E for the SP500 is 32.95. That looks over-valued, but where else are investors likely to put their money.

By comparison, some of Australia's high flyers look "reasonable", e.g., Afterpay (APT) >34, but that's hardly in the value equation. The average for the Australian market is 18.2. Much better value than the American market. But, if America goes into crash mode - so will our market.

Breadth.

Measures of breadth imploded this week

ASX100 Stocks above the 200-Day MA fell from 49% to 36% this week.

Stocks above the 50-Day MA fell this week from 62% t0 44%, while stocks above the 10-Day MA fell from 44% to 10% this week.

That's a serious change in market sentiment.

NewHighs/NewLows Oscillator also fell this week but still not into the bearish camp.

The NH/NL Oscillator has fallen back to the zero line, where it's been many times since late April, and then recovered. This will deserve close watching.

Stocks/Bonds Ratio:

The Stocks/Bonds Ratio has returned to its zero line. Any further fall, and it will be time to play defence, prefer Bonds over Stocks.

Weekly Performance of Sectors:

The best relative performer was Consumer Staples (XSJ) down -0.05%. The rest were cactus.

Here's a list of relatively strong stocks in the ASX100:

Utilities: No listings

Industrials: No listings.

Materials: No Listings

Financials: No Listings

Property: No Listings

Health: Resmed*

Information Technology: No Listings

Consumer Staples: CCL*

Energy: No Entries

Consumer Discretionary: No Listings.

Telecommunications: No Entries

I use a set of six criteria to test each stock. The stocks chosen are positive on all six criteria.

Only two stocks out of 100 meet the criteria. Three weeks ago, 33 stocks met the criteria. That tells the story of how poor our market has been.

*The strongest stock in each sector is marked with an Asterisk.

Large-Cap Stocks with Low Volatility

Only one stock meets the basic criteria represented in the above table. That stock is AST, but it is below its 20-Day MA, so it also is discarded. No picks this week.

ETFs:

Only two ETFs meet the basic criteria in the above table. IEM bounced off its 20-Day MA on Friday. If it can maintain that on Monday, it becomes a pick. The other ETF is the one for bonds. It, however, is below its 20-Day MA and should not be considered.

With the American Election on Tuesday, we could see on-going volatility.

After the last one in 2016 when Trump won, the market rebounded rapidly.

Play defence until we see what happens on Tuesday night (our time), We should have results coming through around the middle of Wednesday (our time).