XJO Weekend Charting and Chat - 6th Oct 2017, page-16

Executive Takeaway.
Our market remains range bound and in danger of breaking lower. If that happens, take defensive action.

XSO (Small Ordinaries) is strong on all time-frames and set a new One-Year high this week. Look to small mining companies for trading opportunities.

Amongst the large-cap stocks the following appeal: Qantas, COH, Santos, CSR, S32, LLC, AWC. Wait for a rebound in CYB.

CONTENTS

• XJO Charts, Daily, Weekly, Monthly.
• Multiple Time Frame Trends
• Internals – Australian Market.
• Best Sectors.
• Summing Up.

XJO Charts, Daily, Weekly, Monthly

XJO Daily:



The three-day pattern (Wed-Fri) this week is bullish. Critical Support has now held multiple times. Risk is to the upside.

XJO Weekly:



XJO was up 0.51%. I’ve changed the chart from a regular candle-stick chart to a Heiken-Ashi chart. Fifteen of the past sixteen H-A Candles are indecisive “doji” candles. The chart remains indecisive but holding at support. Wait

XJO Monthly:



XJO was down in September -0.58%. The first week of October it is up +0.51%. It’s too early to make any decisions on the basis of this chart.

Indicators are all on sell signals.

If the XJO breaks Critical Support on the Daily Chart – take defensive action.

MULTIPLE TIME FRAME TRENDS.

The following matrix is based on concepts borrowed from Chande Tushe a well-known American technical analyst. It provides insights into trends in multiple time-frames for major Australian market indices and sectors. It should not be taken as trading advice but provides an overall “map” of what is happening in our market.

	Column 1	Column 2	Column 3	Column 4	Column 5
0	Index	Short Term	Medium Term	Intermediate Term	Long Term
1	XJO	Flat	Down	Down	Down
2	XTL	Flat	Down	Down	Down
3	XMD	Flat	Down	Down	Up
4	XSO	Up	Up	Up	Up
5
6	XMJ	Flat	Flat	Up	Up
7	XEJ	Flat	Up	Up	Flat
8	XXJ	Up	Flat	Flat	Down
9	XNJ	Down	Down	Flat	Up
10	XDJ	Flat	Down	Down	Flat
11	XHJ	Up	Up	Down	Flat
12	XPJ	Down	Down	Flat	Down
13	XUJ	Down	Down	Down	Down
14	XSJ	Down	Down	Flat	Up
15	XTJ	Down	Down	Down	Down
16	XIJ	Down	Flat	Long	Long

Small Ordinaries is up on all time frames. This week it made a new One-Year high. That’s the area to be in at this time.

Avoid any sectors that are “Down” in all time frames, i.e., Utilities and Telecoms.

INTERNALS – AUSTRALIAN MARKET.

The following is a graph of the Relative Strength of the various Sectors of our market over the past 12 Weeks:



This graph is a intermediate-term trend indicator. The strongest sectors are XMJ (Materials) up +6.8% and Energy (XEJ) up5.07%. XMJ has strengthened this week. XGD is an industry group, a sub-set of XMJ. (I include that as a lot of traders like to play in that area, and is often a good safe haven if we get a bear market.) Four out of eleven sectors are positive.

Look for opportunities in the strongest sectors. Avoid the sectors well below the zero line, e.g., Telecomms and Utilities. There are always individual exceptions to those rules.

We have six Sectors above their 200-Day Moving Averages: Industrials, Materials, Health, Info.Tech., Consumer Staples and Energy. Five Sectors are below their 200-Day MAs: Utilities, Financials X-Prop, Property, Consumer Discretionary and Telecomms. (This is a long-term trend indicator.) It is still slightly favouring the bull side.

The number of stocks positive on the Directional Movement Histogram rose this week up from 33% to 42%. That remains below the bearish threshold. It 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 rose a little. Last week it was at 54%, it rose to 56% this week.

ASX100 stocks above the 50-Day MA also rose marginally this week. It is up from 38% to 39%.



Internal indicators improved a little this week but not strong enough to indicate a trend change. Another poor week next week would throw these generally into the bear category.

SECTOR CHARTS (Daily)

XMJ (Materials)

XMJ is the best performing sector on a 3-Month basis. It was up this week +2.27%



XMJ has broken its downtrend. Indicators have turned up. The chart is in “no-man’s land” on the narrow (25, 0.5) Bollinger Bands. The short-term is positive but until it clears no-man’s land, it is wise to be cautious.

The strongest stock is a non-mining stock CSR, MOM Rating +1.08. The strongest miner is S32, MOM Rating +0.87. The third strongest stock is also a miner, AWC, MOM Rating +0.82. Rio is the best of the big three iron ore miners, and is worth a thought with a MOM Rating of 0.45.

XEJ (Energy):

XEJ was flat this week, -0.18%. It is in a trading range and probably headed back to the top of the range. Wed-Fri action this week was bullish in the short-term.



Santos is currently the strongest stock, MOM Rating +1.05. Indicators on Santos have turned back up so it’s recent pull-back is probably over.

XUJ (Utilities)

XUJ was down this week -2.49%.

By any metric, XUJ is performing poorly. Leave it alone until we see signs of definite improvement.



Consumer Discretionary (XDJ)

XDJ was down this week -0.51% and the downtrend remains intact.



XDJ has been in a downtrend since late June. There’s no sign yet of that being reversed.

Leave it alone until we see signs of improvement.

Telecomms. (XTJ)

XTJ is a basket case. It’s difficult to comprehend that in a developed nation such as Australia we have an essential infrastructure industry like Telecomms doing so badly.

It was down this week -2.31%. Avoid.



Health (XHJ)



XHJ topped out in early June, and since late August it has been in a gentle up-trend. It remains vulnerable until it gets back above major horizontal resistance.

The big two in the Health Sector are CSL and Cochlear (COH). They are affected adversely by rises in the Ozzie Dollar. The recent falls in the Ozzie Dollar have helped those two stocks. Currency effects aren’t, of course, the only factor impacting these stocks, but all things being equal they are an important factor.

Cochlear is the strongest stock and this week broke above overhead resistance. It is worth a look

Consumer Staples (XSJ)



XSJ was down a little this week -0.22%. It is now in a short-term and medium-term downtrend. Again this week the 200-Day MA provided support.

The strongest stock is Treasury Wines. It had been in a short-term downtrend from mid-September. This week it turned up again so the pull-back could be over.

WOW and WES are the two biggest retailers in Australia. I’m not keen on either from a technical perspective. The differential between WES and WOW favours WES, but that’s because WOW has weakened more than WES.

Wesfarmers has a dividend, fully franked, of 5.4%. Return on Equity is 12.3% which has been steadily improving since 2008 when it was 5.4%.

Industrials (XNJ)



XNJ up this week, +0.36%. Despite the small rise this week, the index remains below major MAs but above the 200-Day MA. We might need a test of the major horizontal support line on the chart before we see more upside.

Qantas is the strongest stock in the Sector with a MOM Rating of 0.69. It hit a one-year high this week, so it is worth considering.

Financials X-Property (XXJ)

XXJ is the largest sector in the XJO. XXJ up this week +0.59%. After a strong rise from mid-September, it has been consolidating. It needs to get above the 200-Day MA and major horizontal resistance to have appeal.



CYB remains the strongest stock. It’s a spin-off by NAB when it divested its UK assets. CYB’s MOM Rating is +0.64. CYB doesn’t yet have a dividend record. CYB is currently in a pull-back. Wait for that to run its course.

Last week I suggested a watch on MQG – “it could be the surprise packet in this sector”. It’s worth a look
NAB is the strongest of the four big banks although it is not especially strong with a MOM Rating of +0.22.

Sentiment is still against CBA. It has a MOM Rating of -0.19. CBA received a broker upgrade this week, and ANZ received a broker downgrade. Price on each responding in a corresponding fashion.

Property (XPJ)



XPJ fell this week -0.96%. It is back to the bottom of its trading range and seems likely to rise this week. It remains below the 200-Day MA – so be cautious.

The strongest stock is LLC with a MOM Rating +0.77. It’s worth a thought, but I wouldn’t be too keen on any of the others.

Gold Mining (XGD)



XGD was up this week +1.36%. It touched its 200-Day MA from below. It needs to get over that.
Indicators have turned up so some more upside is likely in the short-term, but this looks like a counter-trend rally.

Leave this one for the traders.

Summing Up:

Our market remains range-bound and has once again bounced off Critical Support. Indicators on the Monthly Chart have given long-term sell signals. If we see a break below Critical Support on the Daily Chart it will be time to take defensive action.

Not much appeals in the Top 100 stocks. The best looking are Qantas, COH, Santos, CSR, S32, LLC, AWC. Use technical analysis for entry and exit. CYB might be having a short-term pull-back. Watch for a rebound.

The strongest sectors this week were Materials +2.27% and Health +1.08%. Materials is also the strongest sector on a 12-Week basis. XSO is very strong and set a new One-Year high this week. Traders should look to XSO for opportunities. XSO is heavily weighted to the mining industry.