The daily XJO chart has been in a positive uptrend since early April.
It had a good week this week, up +0.88% with strong overseas markets giving it a lift.
Back in early April, this uptrend started with a "tweezer" bottom and positive divergences on indicators. It was also at a horizontal support level. Short-term stochastic was about to cross positively above the long-term stochastic.
Now we have the reverse situation:
a "tweezer" top,
negative divergences on indicators,
and at a horizontal resistance level,
the short-term stochastic is about to cross negatively below the long-term stochastic.
I couldn't want for a more obvious time to call a downside reversal. Of course, anything can happen on the stock market - no 100% right predictions exist.
XJO Weekly:
The weekly chart has had six up weeks in a row with a rise of ~6%. That's brought it up to the early January high.
A break above January's high would be bullish and bring into sight the all-time high set back in 2007. I'm not expecting that to occur in the short-term, given the structure in the daily chart, but it remains a possibility in the medium term.
INTERNALS – AUSTRALIAN MARKET.
Despite the rise in the XJO this week, measures of internal strength didn't change much from the previous week.
Percent of ASX100 Stocks above their 200-Day MA stands at 62%. A week before it stood at 61%. A marginal improvement.
Percent of ASX100 Stocks positive on the Directional Movement Index stands at a bullish 80.8, but that's a fall from the previous week's score of 86.9%. Stocks above the 50-Day MA stands at 79.8% where the previous week's reading was at 81.8%.
So there hasn't been much improvement in breadth despite a solid one-week gain. That suggests that the broad market could be stalling.
Only five out of 11 Sectors were up this week. The previous week we had all sectors up. That again suggests that our market is stalling.
The two best performers were the resources sectors, Materials +2.95% and Energy +2.75%. In third place was XHJ (Health) up +2.09%. Those are all very good results but emphasise the unbalanced nature of the market. Unbalanced markets have a higher possibility of tipping over.
Sector Charts:
XUJ -0.31% this week.
Utilities (XUJ) has formed a small double top when it hit the 200-Day MA resistance. Further falls seem likely.
A decisive break above the 200-Day MA would bring this sector back into bullish consideration.
With the sector looking to drop further, it's best to wait before entering in new longs.
XMJ +2.95% this week.
XMJ paused at major horizontal resistance then powered above that on Thursday and Friday. The sector is now overbought and MACD Histogram is showing a negative divergence. We will probably get a test of that old resistance level as support. If the test is successful and XMJ bounces we could see more rises.
Wait and see how any test goes. The strongest stocks are S32, BSL, BHP and AWC. EVN and NCM, gold mining stocks, are not as strong but worth a look.
XDJ +1.92% this week.
XDJ had a small pull-back early in the week, but then showed good strength on Thursday and Friday.
Stocks in XDJ are a mixed bag with the big retailers (HVN, JBH) both doing poorly since early this year. JBH was down every day last week, while HVN is in a short-term sideways consolidation. Avoid those two stocks.
The XDJ was helped this week by a good rise in REA Group up 5.94%. Most of that occurred on Friday when it was up +5.23%. It is the strongest stock in the sector.
XTJ down -1.02% this week.
XTJ has rolled over at horizontal resistance. That's not a good sign.
The current rally now looks like a counter-trend rally.
XTJ was hurt on Thursday by a big fall in Telstra after news that U.S. sanctions against China will stop sales of its home-brand, Chinese made, smart phone in America.
VOC is the strongest stock but probably left to traders until it gets back above its 200-Day MA.
XIJ down -0.76% this week.
XIJ looks likely to fall back and test the old resistance level as support. If that is successful, we should see more rises ahead.
XIJ is a small sector and can move swiftly if one of its components has a good move. Wisetech (WTC) (+9.2%) this week followed up from the previous week's huge rise. It has made a decisive move above its 200-Day MA. Buy the dip.
XEJ up +2.75% this week.
Energy (XEJ) has now reached horizontal resistance and paused on Friday. Indicators are setting up for a pull-back with the "squeeze" on the Stochastic a most obvious sign.
Look to buy the dip. A pull-back to the 20-Day MA, and then a bounce would be a good buying opportunity.
The best bets Woodside and Oil Search. Avoid Caltex.
XHJ up +2.09% this week.
XHJ (Health) had a solid up week. Friday's doji candle-stick coming at a very over-bought level looks ominous. A big down day on Monday would confirm the start of a pull-back.
Recent rises have been dominated by take-over activity in Healthscope.
CSL is the best of the other stocks. It is always worth a look.
XSJ down -0.23% this week.
XSJ hit another all-time high this week then rolled over. Expect a test of the old resistance level as support. If it bounces off that, expect more upside. XSJ is way above its 2007 high - one of the few sectors to achieve that.
The strongest stock in XSJ has been Treasury Wines (TWE) but it fell heavily on Thursday and Friday. More downside seems likely, but this looks like another opportunity to buy TWE at a better price. Buying the Dip on TWE has been a profitable strategy.
Both Woolworths and Wesfarmers are faring reasonably well. Woolworths is preferred.
XNJ down -0.15% this week.
XNJ has rolled over at horizontal resistance. Buy the dip.
Strongest stock continues to be Aristocrat Leisure. Macquarie Atlas may be a "buy the dip" candidate. It fell this week after a good run-up. Watch.
XXJ down a little this week -0.17%.
XXJ is another sector which rolled over this week. It was harmed by a poor trading up-date from CBA which was down -2.84% on Wednesday. NAB is also performing poorly - down every day for the past seven days. ANZ is performing better but on Friday it hit its 200-Day MA and fell intra-day. A big down day on Monday would confirm a short-term bearish out-look.
MQG is the best stock in the sector. It is currently overbought. Look to buy the dip.
XPJ up +0.91% this week.
XPJ (Property) looks promising. It is currently consolidating after its recent big rise when it broke decisively above its 200-Day MA. Buy the dip.
The strongest stock is Goodman (GMG).
XGD up +2.5% this week.
XGD (Gold Mining) continued to rise above its recent trading range. That's a bullish move. See if we get a successful test now of the old resistance level as support. Buy the dip.
Best amongst the large-caps are EVN (Evolution Mining) and NCM (Newcrest). The Gold Miners Index includes many small gold companies which provide good trading opportunities. Conclusion
The Australian stock market has had six good weeks and this week performed well. The performance was, however, unbalanced with more sectors on the negative side than the positive side.
As I went through the Sector charts I became more and more bearish - confirming the bearish technical signals talked about in the Daily XJO chart.
It's difficult to see our market being up in the coming week.
(20min delay)