Our market is on the cusp of bullish/bearish sentiment. This could go either way.
We’re entering a period of seasonally bearish movements in stocks, so the probabilities are tilting to the bear side.
CONTENTS
XJO Charts, Daily, Weekly, Monthly.
Internals – Australian Market.
Sector Charts.
Summing Up.
XJO Charts, Daily, Weekly, Monthly
XJO Daily:
XJO remains in a sideways trend. Mid-week it broke above the small symmetrical triangle marked on the chart. That failed in spectacular fashion on Friday. Symmetrical triangle breakouts are not very reliable.
Watch for a breakout from the trading range: 5834 to 5660. That’s a 174 point range or about 3%. An upside breakout is unachievable in a week.
The XJO has closed below the 200-Day MA four times since mid-July. Anybody using that as a sign to go short has been whipsawed. Wait for a break of horizontal support.
XJO Weekly:
XJO finished down this week, -0.35%. The long-term trend is up, but the Index is at the lower edge of the bullish Standard Error Channel – which corresponds, more or less, with the lower Bollinger Band, horizontal support and the 49-Week MA. That’s powerful stuff. A decisive break lower would suggest we’re in a bear market. But – such powerful support is difficult to break, so the probabilities still lie to the upside.
Wait.
XJO Monthly:
XJO down this month -0.33%. One trading day to go in this month. Momentum indicators are all flashing bearish signals (below their 5-Month MAs).
The big challenge for the XJO is, in round numbers, 6000. XJO needs to get over that to maintain this bull market.
It doesn’t feel like because of day-to-day volatility, especially in the big banks, but not much has happened to the XJO for two months. June was down just a tad, -0.05%, and July just a little more -0.33%. That’s very little movement in two months.
INTERNALS – AUSTRALIAN MARKET.
This week (XJO down -0.35%) saw more moderate changes in sectors.
Four out of 11 sectors were up. XMJ (Materials) again showed strength, +1.7%. Next came XSJ (Consumer Staples) +0.77% and XPJ (Property) up +0.58%. XTJ (Telecoms) just nudged above the zero line.
The three weakest sectors were XUJ, XNJ and XEJ.
XUJ was down strongly, -2.25%. It is now looking very bearish and has fallen below its 200-Day MA.
XNJ (Industrials) was down -1.64%. XNJ which had been one for the best performers on the XJO has been in a downtrend since mid-June. It’s still well above its 200-Day MA and now oversold. Watch for a move to the upside in the near future.
Energy continues to be one of the weakest sectors, down this week -1.44%. It topped out in mid-May, but has been travelling sideways since late June. So it might be forming a base. I keep hoping for good things from Energy – but it continues to disappoint. Follow the charts not hopes.
The number of stocks positive on the Directional Movement Histogram rose marginally from 31% to 34%. This needs to get back above 50%. A move down below 20% might mean the end of this downtrend.
This is a shorter term trend indicator and can move more rapidly, week to week, than the long-term indicator (stocks above the 200-Day MA). Stocks above 200-DMA continues to trend down. This week it is at 53% – barely above the mid-line. The XJO finished the week below its 200-DMA. Our market is teetering on the edge of the demarcation between bull and bear.
Until we see a reversal in this data, there’s no point in entering this market. Listen to the trend. This is again saying: Wait.
SECTOR CHARTS (Daily)
XMJ (Materials)
XMJ was the best performer in our market this week, +1.7%
It has now failed at horizontal resistance several times and remains in a wide trading range.
On a momentum basis, the three best performers are all miners: FMG (0.876), BHP (0.643) and S32 (0.609). Anything with a MOM Rating >1 is very strong. FMG is not far off that.
The improvement in the miners is a welcome change from earlier in the year.
Nothing else is performing well enough to consider.
XEJ (Energy):
XEJ was down this week -1.44%
XEJ is well below its 200-Day MA and finding resistance at the 49-Day MA. That’s far from encouraging.
Santos is currently the best stock. It’s had a couple of good weeks but is still well below its 200-Day MA. I’d want to see it doing better than this to be considered.
Energy tends to be volatile. I’d leave it alone until we see further developments.
3. XXJ Financials X-Property:
XXJ down this week -0.98%. XXJ is in a gentle up sloping channel. These have a tendency to continue. Such gentle uptrends play mind tricks with traders as very short term movements up and down occur within the shallow uptrend.
The Index broke below its 200-Day MA on Friday.
Perhaps more importantly, the 13-DMA has crossed above the 49-DMA for the first time since the Bearish x-over marked on the chart. So the long-term down trend in XXJ is probably over.
Several stocks have MOM Ratings between 0.4 and 0.6: BOQ, IFL, ANZ, AMP and WBC. Those aren’t especially strong ratings but worth watching. NAB is the weakest of the four big banks.
XUJ Utilities
XUJ had been a consistent top performing sector, but is now in a downtrend, this week -2.25%.
The 200-Day MA was broken to the downside on Friday.
The Dynamic Zone Stochastic has squeezed together, suggesting we’ll see a big move soon. Given that the sector is very oversold, that suggests we’ll see an upside move.
Watch.
XNJ Industrials
XNJ broke downwards on Friday from a short-term sideways consolidation. For the week it was down -1.64%. Like XUJ, XNJ was a recent good performer.
ALQ (MOM Rating 0.6) and CIMIC (MOM 0.49) are the strongest stocks.
XSJ Consumer Staples
XSJ had a better week, +0.77%.
XSJ it remains in a trading range. Traders can look to buy at the lower end of the range.
WOW has improved its edge over WES. If you must have one of the two big retailers, WOW is preferred. I’m not particularly keen on either.
XHJ Health
Health down this week, -1.03%. That’s the fifth week in a row where XHJ has suffered substantial falls. Like XUJ, XHJ was one of our best performing sectors, but investors are rotating out of the Sector. The rising Ozzie Dollar negatively affects some of the bigger stocks in this sector which earn substantially in overseas markets. Technically, the chart doesn’t suggest that the fall is over. Until we see signs of improvement –
Avoid, but don’t count it out.
XPJ Property
XPJ has had a couple of good weeks, up this week +0.58. This looks, however, like a counter-trend rally.
Mirvac (MGR) and Vicinity Centres (VCX) are largely responsible for the upward movement in the Sector. Watch.
XGD Gold Miners
XGD up this week +1.04%. It’s been in a downtrend since mid-June and now getting close to horizontal support. It was creamed like most of the market on Friday and retreated from its 49-Day MA. That doesn’t provide much confidence.
We’re in a seasonally favourable time of the year for Gold. So I’m looking for a solid up move in the Gold Miners.
This is a volatile industry group with a lot of small cap companies. Good traders can make money here, but it’s not for investors – unless they’re convinced we’re entering a secular bear market when Gold tends to outperform.
XDJ – Consumer Discretionary.
XDJ finished down for the week -0.63%. It’s been zigging and zagging but remains in a range. It is getting back close to the lower edge of the range so traders might make money here. Others can wait.
Some of the best short-term performers are in this sector: HVN, FLT, JBH, NVT and REA all have MOM Ratings >0.6. HVN and JBH are both coming off a low base. HVN seems to have burnt a few shorts. (Those are the ones that Gerry succinctly told to “piss-off”.) JBH and HVN remain below their 200-Day MAs. Careful.
XTJ Telecoms.
Telecomm was up marginally this week +0.06% It seems to be forming a base.
Forget about XTJ until we see solid improvement.
Summing Up:
There’s not much to get excited about in the Australian market. Some of the big miners, a couple of the banks and a couple of stocks in Consumer Discretionary are worth a look, but not much else appeals.
The XJO remains in its frustrating sideways consolidation. Until we see a break-out from that, one way or the other, it’s best for long term investors to wait patiently.
I’m no longer cautiously bullish, but neutral. Our market is on the verge of making a major turn to the bullish side. It may or may not happen. Given that we’re entering a seasonally weak time for stocks, the probability is tilting to the bearish side.
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