CONTENTS 1.Australian Market. Indices Performance Year to date. 2.Australian Market. Indices Performance This Week. 3.Australian Market. XJO – Monthly Chart 4.Australian Market. XJO – Weekly Chart 5.Australian Market. XJO – Daily Chart 6.Australian Market: Valuations 20 Leaders. 7.International Markets: SP500 Weekly 8.International Markets: US$ Gold Daily 9.International Markets: Gold Weekly 10.International Markets: China Daily 11.International Markets: Copper Weekly 12.Summary and Conclusion 13.SLF – Daily 14.STW – Daily
AUSTRALIAN MARKET: INDICES PERFORMANCE – YEAR TO DATE
XAO: down marginally in 2014 -0.09%. Six of ten S&P Indices are up.
S&P Indices Performance – best to worst: 1.Info.Tech: +6.64% 2.Utilities. +4.74% 3.Health: +2.52% 4.Industrials: +1.77% 5.Consumer Discretionary: +0.66% 6.Financials.: +0.01% 7.Energy: -0.44% 8.Consumer Staples: -0.66% 9.Materials: -2.81% 10.Telecoms: -4.03%
Other Indices: 1.Property: +2.27% 2.Financials (Ex Property): -0.35% 3.50 Leaders: -0.89% 4.Small Ordinaries: +0.53% 5.Mid-Cap 50: +3.01% 6.Metals and Mining: -3.87% 7.Gold Miners: +38.7%
The broad market index (xao) has now basically made no ground since the beginning of the year. The two best performers (ignoring Info.Tech.) are both Defensives – Utilities and Health. Financials represent the pivot point – virtually flat for the year – and they are the largest sector in the market. The big winner, of course, is the Gold Mining Sector. The Mid-Cap-50 outperforms because it is not as skewed by the Big Banks which make up about 30% of the 50-Leaders. If the Four Big Banks underperform its difficult for the 50-Leaders to out-perform the Mid-Cap 50 which are more evenly distributed amongst sectors.
AUSTRALIAN MARKET: INDICES PERFORMANCE – THIS WEEK
XAO: down this week -2.37%. All ten S&P Indices are down.
S&P Indices Performance – best to worst: 1.Health: -0.63% 2.Telecoms. -1.24% 3.Financials: -1.59% 4.Utilities: -1.72% 5.Consumer Staples: -1.88% 6.Info.Tech: -2.38% 7.Industrials: -2.68% 8.Consumer Discretionary.: -3.31% 9.Energy: -3.59% 10.Materials: -4.95%
Other Indices: 1.Property: -1.89% 2.Financials (Ex Property): -1.54% 3.50 Leaders: -2.28% 4.Small Ordinaries: -3.15% 5.Mid-Cap 50: -2.87% 6.Metals and Mining: -5.13% 7.Gold Miners: +1.183%
Unless you were a Gold Bug, there was no where to hide this week. This feels like bear market territory. Four out of the five best (relative) performers were all defensives, with the fifth being the high-dividend paying Financials. The big export oriented cyclicals were at the bottom of the leader table. 50-Leaders out-performed the Mid-Cap-50 emphasising the switch to safety.
AUSTRALIAN MARKET: MONTHLY CHART – XJO
Despite the poor week, the long term (monthly) chart shows no sign of serious deterioration. About half-way through the month, the XJO is down for the month -1.41%. It finished a little below the middle of the Standard Error Channel but well above the lower level.
The Index is above the 20-Month Moving Average and above major horizontal support at 4980 (round figures).
MACD Histogram, RSI and CCI are all showing divergence from the main chart. This means that momentum has slowed.
Seasonally, March tends to be relatively strong. But that strength tends to come in the first half of the month. The second half tends to be weaker. Also, the second half of the month tends to be weaker for Gold, which so far this year has played a small but significant part in keeping the XJO afloat. If the second half of March plays out according to the seasonal pattern, the Ozzie market could be in for a rough time. It’s a mistake, however, to play the game according to past seasonal history. Watch the charts.
It’s clear, however, that the Australian market isn’t, unlike the American market, under the influence of a relentless bull like we experienced in 2002-2007.
AUSTRALIAN MARKET: WEEKLY CHART – XJO
The XJO finished at 5329.4, down this week, -2.43%. The weekly candle is a bearish engulfing candle
Indicators: 1.MACD Histogram. Marginally above zero. Neutral. 2.MACD. Negative divergence. 3. RSI.9 is at 51.3. Positive but turning down. 4.CCI.14: +65.6. Turning down from above +100. Negative.
The XJO has been in a trading range for some months, going back to July, 2012. This week it moved back strongly below resistance.
Indicators suggest this could go a lot lower. At this stage, however, the Index has plenty of support below it. We could be going back to the lower edge of the trading range.
AUSTRALIAN MARKET: DAILY CHART – XJO
The trading range can be clearly seen. This week was negative with two big down days.. The week started with a big down day – and finished with a bigger down day. Such a move often results in at least a pause and often a retrace.
The chart has how completed a double top. Double tops are highly reliable. Bet against them at your peril. The chart has also broken below the top of the Santa Rally which ended on 2 January.
The magnitude of the daily pull-backs on Monday and Friday suggest that buyers are now vacating the market. Considerable technical damage has been done. The 40-Day MA (blue dashed line) might provide some support – but I expect that to be broken.
It’s clear – the short term trend is down.
AUSTRALIAN MARKET: VALUATIONS – 20 LEADERS
The 20 Leaders are the 20 largest stocks on the Australian stock market and make up almost 50% of the total market. They are often obligatory holdings for many Institutions managing funds.
The AEM is an open ended model. A reading of 1 (the mid-line on the chart) is considered “fair value”. Above One is over-valued and below One is under-valued. The theory is that if you buy under-valued stocks they will out-perform the market. If you buy over-valued stocks they will under-perform the market.
By extension, if we take an average of all the stocks we can discover whether or not the market should out-perform or under-perform.
Assessing the universe of all stocks on the market is beyond the resources of this humble blogger. But the 20-Leaders is a reasonable proxy. The correlation between the XTL and the XJO is close to perfect. Where the XTL goes, the XJO goes.
The average AEM for the XTL this week is1.36, down a little on the previous week’s reading of 1.37, but well above fair value at 1. Under valued stocks are: ANZ, QBE, Suncorp, Telstra, Wesfarmers and Woolworths. Fair-value stocks are: CBA and Westpac. Overvalued stocks are: AMP, BHP, Brambles, CSL, Macquarie, NAB, Newcrest, ORG, RIO, Santos, Westfield and Woodside.
Valuations are not good timing mechanisms. Overvalued can become more overvalued; undervalued can become more undervalued. Buy and sell signals need to be taken using more sensitive technical indicators.
INTERNATIONAL MARKETS: SP500 Weekly
SP500 has been in an extraordinary bull market. Any bull-back has been bought since the major bottom in mid-2011. We could be seeing a pull-back now. The weekly candle is a bearish engulfing. Indicators have turned down, and showing negative divergences. This week’s candle has also broken below recent horizontal support. All of that adds up to a trend change – at least in the short term. We can expect some more down side. Now we have to see if the dip is bought, as has happened on numerous occasions in the past three years.
INTERNATIONAL MARKETS: US$ GOLD WEEKLY
US$ Gold was up this week +3.11%. One of the few bright spots in most markets.
The long-term pattern in US$ Gold is, more or less, following through on an age-old process. It’s what happens time and again in a stock or commodity.
The Stages are:
1.A long term up trend ending in a blow-off, exponential rise. 2.A fall back and consolidation. In this stage there’s lots of optimism that the up trend will be resumed, but the Strong Hands take this opportunity to distribute to Weak Hands. 3. The down trend is affirmed. 4.Another sideways consolidation takes place, in which further distribution occurs. 5.Resumption of the down trend. (Still to occur in US$Gold).
The distribution phases are great places for good traders – but for neophytes they hold out hope that the old long term up trend will be resumed. It’s unlikely to occur for some years.
At this time, the medium term trend remains up. Good traders continue to hold. But – the first sign of weakness will see them depart – quickly.
INTERNATIONAL MARKETS: CHINA DAILY
Three weeks ago, the Chinese markets broke down below a major support level. The indicators are oversold and MACD is showing a positive divergence. So there’s some hope for a counter-trend rally.
But that’s probably all it will be. Until that major oblique down trend line is broken to the up side China remains in a secular bear market. That’s not a great support for continued upside in our market.
INTERNATIONAL MARKETS: COPPER FUTURES
Copper topped in early 2011 and has since been in a major downtrend. There have been plenty of trading opportunities since (I’ve marked some on the chart) but the very long term down trend has been inexorable.
It is currently on a sell signal and has broken below a major horizontal support level, which suggests we will see further downside. This is a big negative for our broad market, and particularly the mining companies. It’s also a likely indication that the world economy may be turning down, particularly the emerging economies which are heavy uses of base materials such as copper and iron.
SUMMARY & CONCLUSION
This week saw some major down turns across lots of markets. Plenty of commentators are suggesting that this is due to short term effects, e.g., poor weather in America, Chinese New Year in China, Ukraine tensions. Maybe they’re right, but this is beginning to look like more than short term effects. America is still looking strong, but weakness showed up this week. Any dips since 2011 have been relentless bought. Perhaps this one will too, but, eventually, we’ll see a cyclical bear market take over. The Australian market is looking vulnerable with a double top in place and continued weakness in China and metals.
Gold has been the big winner this year and our Gold Miners have shown stunning returns – nearly 40%. If past history is any guide, this rally is just part of a broad market pattern which will, eventually, see the down trend re-asserted. Maybe I’m wrong. The current uptrend is strong. I might add that I have a private technical indicator that now has NCM on a “sell” signal – as of Friday. That could see the end of this trend. But it could just be a short term blip. We only know for sure in hindsight.
Short term, we may see some strength early next week. Friday was so bad in Australia, some sort of pause or reaction to the upside seems inevitable. But – after that – I think we’ll see the down trend resume – probably to test the bottom of the trading range that’s been in place for months.
For very long term Ozzie holders – their trend remains up.
For daily updates – check http://redbackmarketreport.wordpress.com/
ETF: SLF – WEEKLY
SLF is the tracking stock for the Property Sector.
Property along with most stock sectors fell heavily this week, down -1.99%.
In the very long term, SLF remains in a sideways trend. Short term it is in an uptrend but held by the upper horizontal resistance of the sideways trend. A break above that would be bullish.
According to Comsec, SLF Dividend Yield is 5.1%. Dividends are paid quarterly. The most recent Ex-dividend date was 31 December, 2013. Dividend was .1242c per share. That’s better than bank interest – if you can cope with the stock market risk. Long term holders will continue to hold and take the divvies. (Next ex-dividend date is late March, 2014.)
(SLF is the Exchange Traded Fund which tracks the performance of the Property Sector on the Australian stock market.)
ETF: WEEKLY STW
STW is the tracking stock for the ASX200 (JXO).
This week the ETF was down heavily, -2.39%%. The Weekly Candle is a bearish engulfing candle, and indicators have generally turned down. I think we can look for more downside.
According to comsec, Dividend Yield is 3.8%. That lags the dividend on 10-Year Government Bonds.
Dividends are paid half-yearly. The dividend announced on 23 December was124.92 c. That’s the best payout in the past 3 ½ years. Next dividend date is in late June, 2014. The stock is currently priced at $50.15.
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