On Friday SP500 broke upwards from its consolidation below the 20-Day MA. Another upside day will confirm the upside break
The short-term trend channel has risen to the upside. Respect the trend
Indicators have given “buy” signals, and none are at overbought levels. So more upside seems likely
The SP500 is now on a second leg to the upside. A test of the recent high now seems likely
XJO Charts, Daily, Weekly, Monthly
XJO Daily:
Friday’s strong move in Australia “predicted” the strong move we saw in America on Friday night. That’s becoming a common occurrence lately.
That move on Friday took the Oz market above its 20-Day MA. The short-term trend channel is pointing up and Friday’s move took the XJO above a major resistance level. It is now getting into a Congestion Zone, so upside movement could be slowed.
XJO Weekly:
The weekly chart is out of sync with the daily chart. That calls for some caution on the part of traders.
In favour of the bulls are two factors on this chart. XJO has had two weeks of upside movement bouncing off the 50-Week MA. Except for the short-term stochastic, indicators have turned up.
Adventurous bulls will stay with the flow in the Daily Chart. But caution is needed.
Sectors: 12-Week Changes.
Performances over the past 3-months have been mixed. Five out of eleven sectors are down. XJO is up +0.29%. Not much movement
The three strongest sectors have been Materials, Inf.Tech. and Health. Look to strong stocks in those sectors.
INTERNALS – AUSTRALIAN MARKET.
Measures of internal strength were generally better this week, and returned to bullish conditions.
We have six out of eleven sectors above their 200-Day Moving Averages. The six sectors above their 200-Day MA are: Energy, Consumer Staples, Consumer Discretionary, Inf.Tech., Health, Materials. Consumer Discretionary moved this week from below its 200-DMA to above.
The number of stocks in the ASX100 positive on the Directional Movement Histogram rose from 29.3% to 60.6%. Stocks above the 50-Day MA rose from 30.3% to 53.5%. Those are now both in bullish territory.
The slowest moving trend indicator is the line for stocks above the 200-Day MA. That rose marginally this week from 44% to 54%. While it remains above 50%, the Australian market is bullish.
All three measures of breadth are back into bullish territory.
Sectors:
Materials
XMJ slipped a little this week -0.28%.
The three-day pattern Wed/Thur/Fri is bullish.
The trend channel remains down, several indicators have turned up. We’re getting mixed signals for XMJ – but the probabilities after Friday’s action lie to the upside.
The three strongest stocks are EVN (a gold miner), ABC (a construction materials producer) and ORA (a packaging company). Miners tended to be weak in the past week with the Mining index (a sub-set of Materials) down -1.29%, but it did rebound on Friday and may be OK.
2. Health
Health reached another new one-year high this week. It has now been up nine days in a row and it overbought. Look to buy dips.
The good performance in Health is largely due to CSL, up >16% in two weeks. Buy the dip.
3. Inf.Tech.
XIJ is the smallest sector in our market. Only three large-cap stocks stocks make it into the ASX100. XIJ up this week +3.09%
The best performer is Computer Share (CPU) up +3.19%. It is now at the top of the Standard Error Channel and likely to pull-back. Buy the dip.
4. Consumer Discretionary.
Consumer Discretionary was sitting on the 200-Day MA, but bounced strongly off that this week to be up 3.81%. It’s recent pull-back seems to be over. It is now back above both the 20-Day and 50-Day MA with the short-term trend channel heading up. All indicators are bullish.
XDJ was helped this week by a stellar performance of FLT +15.91%. Good performance also came from Crown (CWN) and Harvey Norman (HVN). I’ve got short-term buy signals on both those stocks.
5. Consumer Staples.
Consumer Staples had a good week this week up +3.83%.
Thursday’s action looks like exhaustion has set in after Wednesday’s big up day. A bit of downside follow-through occurred on Friday but not enough to suggest a big pull-back is likely. Caution is advised. See which way Monday goes – and to what extent.
Action in Consumer Staples is dominated by Wesfarmers and Woolworths. Both have recently reported. Wesfarmers report appeared poor, and the price went up. Woolworths report appeared good, and the price went down. Good news is bad news and bad news is good news.
Recently I’ve had a preference for Woolworths over Wesfarmers. Currently they are on a par, with a slight preference for Wesfarmers, but I’d like to see how the next week goes.
The good news in the XSJ was Coca-Cola Amatil (CCL). A perennial underperformer. This week it was up +6.72% and that took it well above its 200-Day MA. It’s now somewhat overbought, so look to buy the dip.
TWE is also performing well.
6. Energy.
XEJ was one of the mainstays of the Australian market – until mid-January. Since then it has underperformed (see the bottom panel). This week it was down -0.59% and appears to be forming a bear flag.
Energy prices were up strongly in America on Friday, so that might be a pointer to where XEJ will go – but we need to see evidence first before committing to this sector.
Steer clear of Energy until we see definite improvement.
7. Telecoms.
XTJ was up 0.87% this week but everything about this sector remains bearish. Any rally is likely to be a counter-trend rally. Avoid.
8. Industrials.
XNJ up this week +1.55%. That’s a good result, but not nearly as good as the best performers this week.
It’s been out-performing the XJO since mid-January, but remains below its 200-Day MA. I’d need a more compelling reason to look at this while it remains in bearish territory.
Qantas, however, returned a good result this week, up 9.77%. Look to buy the dip.
9. Financials
XXJ is always the elephant in the room when we’re talking about the Australian market. It has about 40% market share, so if XXJ struggles, it’s likely that the Australian market will also struggle.
XXJ had a good week, up +1.61%, but still nowhere near as good as the best performers.
It remains below its 200-Day MA and remains a drag on our market while it remains in that position.
The best performer is IAG, up this week +3.77%. It’s worth a look. PPT and ASX are the next best performers.
If you must have a big bank, then look to NAB – but there are better options around.
10. Utilities
Utilities was just on the positive side this week, +0.11%, hurt by AGL going ex-dividend.
Utilities and Property are liked by income seeking investors, but while we have the prospect of rising interest rates these two sectors are likely to under-performe as they’ve been doing since mid-2017.
Until we see a bullish situation develop in Utilities, avoid this sector.
11. Property.
Property had a positive week, +1.34%. It still remains in bearish territory.
There is one stock in this sector which is worth a look, LLC. Leave the others alone. LLC is a little different from most other Property stocks. It has a big construction component and operates in many overseas countries. It was up this week >12% and was the chief ingredient in the sectors positive result.
Stocks on Short-Term Buy Signals.
I have the following stocks on short-term buy signals: CSR, CWN, HVN, REG, SDA, SFR, NXT. Let’s see how they go. Do your own research.
Summing Up:
The market continued to improve this week. XJO is now running into a Congestion Zone so it might slow in the coming week, but a test of the recent high is likely.
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