QQQ, ETF for the Nasdaq
I use discretionary Bollinger Bands (10/0.8) as a defining trend finder. QQQ is currently heading down below the lower BB and the 10 Day MA has turned down. That's a strong down trend.
QQQ is now at an important support level so we may see some consolidation here. But until we see the BBs turn up and QQQ above the BBs, I'll assume the medium term trend is down.
Dow Jones
Until Wednesday, the U.S. market saw rotation out of big Tech and into small/medium cap stocks and industrials. So the Dow Jones was headed higher. Thursday and Friday, DJ joined the rout and headed down, finishing off its strong up trend. But the trend has not yet reversed to the down side. DJ remains just above the 10-Day MA. So the jury is still out on the near term and medium term future of the DJ.
STW tracking ETF for the XJO
The Australian XJO is more similar to the Dow Jones than the Nasdaq (QQQ). Given the big down move on the DJ on Friday night (Oz time), it's reasonable to presume the ASX will break below the current support and find support at the next level down. Then consolidation.
Like the Dow Jones, the strong up trend in the ASX has been broken, but a new down trend is yet to materialise.
Given that the current rally was similar in price and time to the rally in April-May (see black arrows), a medium tern downside move seems likely.
ASX Sector Performance.
XJO finished relatively flat this week. Best performing sector was Property +1.95%, no doubt it is holding up in expectation of a fall in interest rates. The Property sector in the U.S. is showing similar positive sentiment.
The next two best performers were, however, defensive sectors, Staples +1.44% and Health +1.12%.
Growth sectors were prominent in the negative camp. Materials -2.24%, Information Technology -1,81% and Energy -0.52%.
Sector Momentum
Momentum is a leading indicator. Momentum has to change before direction of a stock or sector can change.
Looking at the above graph we can see the following momentum in the sectors.
Financials - Weak
Materials - Neutral
Discretionary - Strong
Information Technology - Weak
Staples - Strong
Telecommunications - Strong
Health - slightly Weak
Industrials - Strong
Utilities - Weak
Property - Neutral
Energy - Strong
Gold Miners - Strong
ASX200 - Weak
Composite Bonds - Strong.
If a sector is currently positive, but momentum is weakening, then the sector may be due for a pull-back. XXJ (Financials) is one example. Similarly, if a sector is currently negative, but momentum is strong, it may be due for a reversal to the upside. Energy (XEJ) is one example. Such examples are worth keeping an eye on.
Gold Miners
Gold Miners (XGD) was in a strong up trend, but that seems to have ended with a three candle bearish reversal at the end of the week. Gold on Friday night was down heavily, so we will see more downside on Monday.
Long Term Investor Index.
The Long Term Investor Index is based on the New Highs - New Lows Cumulative data. While the Index remains above its 10-Day Moving Average, the Long Term Investor can stay in the stock market. Below the 10-Day MA - consider defensive action. LTII has been bullish since mid-December.
Conclusion.
American and Australian stock markets suffered a set-back this week. This is most pronounced in the Nasdaq which is now in a strong down-trend. The Oz market and Dow Jones have both fallen out of their strong up trends, but are not yet into strong down trends. It wouldn't take much for that to occur.
I'm looking for consolidation this week and then a resumption of the down ward momentum.
Watch the charts and stay vigilant.
(20min delay)