Wed. a.m. 1/12/21.  U.S. Stocks down, bonds up.

Overnight:

Dow Jones -1.86%.  SP500 -1.9%.  Nasdaq -1.55%.  Small Caps -2.14%.  Banks -3.05%.

Twenty Year Treasury Bonds (TLT) +1.59%.

It was a perfect storm for stocks last night in the U.S.  First, Fed. Chair Powell said that the Federal Reserve would accelerate the Fed's buying of Bonds, i.e., turn off the spigot that has held up the U.S. Stock market (and other assets).  Secondly, Moderna CEO said it could be months before they could develop an effective vaccine against Omicron.  Thirdly, economic news was poor for stocks with the Chicago PMI and Consumer Confidence falling to nine month lows.  Stocks sunk to the canvas for a 10 count.

Slow Stochastics for all five charts above are now down in the over-sold position.  They can stay there for extended periods of time.

SP500:

The short term down trend continued last hight.  The bottom line of the PRT Bands failed as support.  It wouldn't take much more for the bands to turn from yellow to blue - bearish.

The 50-Day MA (blue dotted line) coincides with a major horizontal support level.  That could be a target for this downside move.

Commodities:

Commodities couldn't escape last night's carnage.  Commodities Index -2.75%.  Energy -3.76%.  Base Metals -0.57%.  Gold -0.67%,  Volumes have been high lately so we could be close to a bottom in Commodities.

Iron Ore +0.2%.

Overnight Oz Futures -0.5%.

Expect more downside today.

 Tue. a.m. 30/11/21.  Major U.S. Indices rebound after Friday's rout.

Overnight:

Dow Jones +0.68%.  SP500 +1.32%.  Nasdaq +1.88%.  Small Caps -0.28%.  Banks +0.26%.

Those numbers in isolation look good (except for the Small Caps) but within the context of the charts give pause for thought.  Dow Jones remains below its 50-Day MA.  SP500 and Nasdaq remain below their respective 20-Day MAs.  Small Caps had a small loss and remains below its 50-Day MA and the rise in Banks was anaemic.  The Banking sub-group remains below its 50-Day MA.  So the indices have more work to do to get above resistances.

SP500:

The medium-term trend remains bullish (PRT Bands yellow).  The short-term trend remains indecisive.  We need to see the short-term line back above the 8-Day EMA to feel confident that today's action isn't a "come-in-sucker-the-water's-fine" move.

Commodities:

Commodities Index flat +0.00%.  Energy up a little +0.12% but was hit with intra-day selling.  Base Metals +0.96%.  Gold down a little -0.14%.

Iron Ore +3.4%

Overnight Oz Futures +0.6%.

We should see some follow-through buying today in our market.

The Cumulative Advance-Decline Line for the American market continues to be of concern (as it is for the Australian market).  The Advances-Declines bounced strongly in early trading last night, but suffered intra-day selling.  The weak performance of the Small Caps (-0.28%) is indicative of that effect.  The Cum A-D remains below its 50-Day MA and its 10-Day MA.  Until we see Cum A-D climb back above the 10-Day MA, it might be best to stay cautious about long-term investments.

  Mon. a.m. 29/11/21.  XJO finished down today, but well off it's lows.

XJO finished today down -0.54% after being down -1.3% in early trade.

It's clear from this chart what happened today.  The XJO broke below the 200-Day MA in early trading and almost reached a major support level.  That brought the alto traders into action and they pushed the market higher, but not enough to put it into positive territory.

Today's action is promising, but doesn't mean a lot unless we see solid follow-on buying tomorrow.

Until proven otherwise, any upside movement should be viewed as a counter-trend rally.

NewHighs-NewLows Cumulative broke below its 10-Day Moving Average for the first time since May 2020.  That's a significant event and suggests long-term investors take defensive action.  I detailed that in yesterday's Weekly Wrap.

Advances-Declines was again negative.  The Cumulative Chart continues to crash.

Until we see an improvement in this metric, it's best to stay defensive.

XXJ (Financials) was again a big drag on the market today, down -1.07% and remains in a strong down-trend.  It did bounce at a major support level today, but any upside should be viewed as a counter-trend rally until we have definite evidence of a bull market in Financials.

Weekly Wrap, Week ended 26/11/21.  A Black Sawn unhinges markets.

Omicron, the latest mutation of the Covid-19 virus, became a black swan for markets on Friday.  Suddenly, instead of confidence in a world recovering from Covid, market denizens thought we could be plunging back into lock-downs, quarantines, travel bans and slowing economic growth.  Israel, for instance, has already banned entry of visitors from all countries.  In Australia, the ACT has imposed quarantines on all incoming  Whether those fears have some reality or not is yet to be seen.  It will depend on how effective the current vaccines are against this new mutation.  Adaptations to current vaccines against an (as yet unproven) more virulent antagonist take time to develop.  Pfizer and BioNTech expect to take six weeks to adapt their mRNA vaccines to deal with the new variant, and about 100 days to ship.

The unknown is the biggest problem for markets.  The unknown stokes the fear which caused some spectacularly market plunges on Friday, e.g. -13% for U.S. Oil.  Until more is known - it's best to take a defensive posture.  The current turmoil could be over quickly - or take us back to the dark days of March, 2020.  No way to know.

In this week's edition, I'll look at the current state of play and suggest what to look for if a rebound is to occur.

Daily XJO chart:

XJO had been range bound for over a month.  On Friday, it broke the lower edge of that range (7312) and finished at 7279 got a loss of 1.73% on the day.  For the week, it was down -1.58%.  

Friday's action took the XJO almost down to the next level of support at 7254.  That seems certain to fall on Monday.  The 200-Day MA might then serve at support.  The 200-Day MA is at 7218.  A major horizontal support level lies at 7174.  That seems to be a likely target for a pause in play.

At this stage, a worst case scenario is for the XJO for fall down as far as 6832.  That would represent a fall of more than 8% from Friday's opening at 7407.

One Week Sector Changes:

Only three sectors were up this week.  Utilities did best +2.04%, but it fell -0.87% on Friday.  Better, relatively, than the XJO but not enough to suggest it will be a safe haven in any extended pull-back.  Materials was up +1.68%.  Some of the miners were starting to look promising as rebound possibilities (particularly FMG), but, on Friday, miners (XMM) fell 1.87%.  Property was up +0.84% for the week but fell -0.96% on Friday.  Expect further losses in those sectors early next week.

The two worst performing sectors were XIJ (Info.Technology) and XXJ (Financials).  XIJ is a barometer of economic expectations.  XXJ has been under pressure for a couple of weeks and fell -1.95% on Friday to be under the 200-Day MA for the first time in a year.  That could be a good indication, unless it recovers quickly, that we're in for a bear market.

This week's action also saw XXJ fall below the high back in February 2020, which occurred just before the bear market which eventuated in March, 2020.  

NewHighs-NewLows Cumulative.

For long-term investors, this is the most important chart to watch.

While the NH-NL remains above its 10-Day MA, long-term investors might feel comfortable in holding their investments.  If it breaks below the 10-Day MA, they might then take defensive action.

This chart has kept investors in this long bull market dating back to mid-2020.  It looked precarious back in late September into October when the XJO pulled back, but the NH-NL CUM didn't cross below its 10-Day MA.  The two lines are once again close together.  If we get another poor result on Monday, this chart could cross below its 10-Day MA.  That would be a sell signal for Long-term investments in Index ETFs.

Stocks in the ASX100 above the 200-Day MA.

% of ASX100 stocks above the 200-Day MA was at 58% this week.  That's the first time since March that such a reading below60% has been recorded.  That is still a bullish number, but down from 68% the previous week.  So another week like this week, and we could see a bearish reading for this metric.  

Strong Stocks v Weak Stocks.

This is a development of my own making.  I mark up all the stocks in the ASX100 according to seven criteria.  Any stocks positive on all 7 criteria are regarded as Strong Stocks (SS).  Any stocks negative on all 7 criteria are regarded as Weak Stocks (WS).

This week saw a negative result in the SS v WS 7 SS and 11 WS.  This is used by me to calculate a cumulative SS-WS chart.  This is a measure similar to the NH-NL Cum (above).  It's a good guide for position traders rather than long-term investors.  While the Strong-Weak Cumulative chart remains above its 10-Week MA, position traders can continue to hold Index ETFs.  The only time this chart was in trouble this year was back in late March when XJO had a significant pullback.  It is once again looking precarious.

Conclusion:

Fear struck our market this week and the XJO plunged down into a medium-term bearish trend.  Just how real is the danger from Omicron is unknowable at this stage.  If markets continue to crumble, long-term investors have four options:

1. Go to cash and hope to pick the bottom and then re-enter the market.  That's always a difficult trick to pull off.
2. Adopt a defensive posture by altering allocations between bonds and stocks if you have a diversified portfolio.  
3. Hedge your portfolio by buying Bear,  the ETF which reacts inversely to the XJO resulting in a neutral position.
4. Hang on for grim death and hope this all just blows away very quickly

Financial advisers will usually opt for No.4.  (You may be able to come up with more options.). It's up to you and your level of tolerance for risk.

Here's the weekly chart for Bear going back to before the March, 2020 bear market:

If the weekly PRT Bands turn yellow, it might be worth considering Bear as an option.

 Sat. 27/11/21.  Covid's new mutation crashes markets.

A new variant of the Covid virus has emerged in Southern Africa which caused WHO to give it a new designation "Omicron".  WHO first described the "Omicron" as a "variant of concern" and said that it could spread more quickly than previous variants.

That was enough to put the bejesus into markets starting with Australia (XJO -1.73%) and Japan (Nikkei -2.25%).  Fear then rolled around the globe.  Markets in Europe fell heavily, (German Dax -4.15%, UK FTSE -3,64%) and America followed suit (Dow Jones -2.53%, Nasdaq -2.23%).  Even more dramatic were falls in commodities.  US Oil, for example, fell -13% on fears that countries would lock-down again reducing demand dramatically.

U.S. Markets overnight:

Dow Jones -2.53%.  SP500 -2.27%.  Nasdaq -2.23%.  Small Caps -3.72%.  Banks -4.19%.

Safe Haven trading:

Traditional safe havens benefitted from the rampant fear.  20-Year Treasuries rose sharply (TLT +2.53%), Japanese Yen looked good against the US dollar.  At one stage in early trading on Friday, USD/JPY was down -1.48%, i.e., Yen up against US$.

Commodities:

Commodities Index -5.96%.  Energy -9.6%.  Base Metals -3.74%.  Gold -0.16%.

Eerie Predictor:

On Wednesday evening I showed the graph of the Australian Cumulative Advances-Declines which showed a dramatic collapse in the Cum A-D.  I've said previously that this is probably the best leading indicator for a fall in the market.  Two days later, CRASH!

Here's the up-dated chart as of Friday p.m.:

I'll give a more comprehensive up-date on the Australian market tomorrow in Sunday's Weekly Wrap.

 Fri. a.m. 26/11/21.  American markets closed.  European markets firmer.

Overnight:

German Dax +0.3%.  UK FTSE +0.3%.  European STOXX600 +0.4%.

Commodities:

US Nymex Crude Oil -0.5%, Iron Ore -3.2%, Copper flat -0.0%.

Overnight Oz Futures -0.1%.

In London trading, BHP -0.3%, that compares to yesterday's result in Australia of +0.99%.  RIO -1.1% compared to yesterday's +1.64%.

We'll probably see more choppy trading today which has characterised the past two days.

 Thu. p.m. 25/11/21.  XJO finished a little higher today, once more in choppy trade.

The XJO continues to sidle sideways in a directionless trend.  That is unlikely to change tomorrow as the American markets are closed for Thanksgiving.

Today, NewHighs-NewLows broke a two-day streak of negative readings, but the Cumulative NH-NL remains precarious.

Advances-Declines was again negative.  That's now a five-day losing streak.

XXJ (Financials) was the big drag on the market today, down -0.9%.

XXJ is in a medium-term bearish trend.  Positive divergence on the CCI suggests we could see a counter-trend rally in the near future.

Thu. a.m. 25/11/21.  Mixed results in U.S. stocks, with T-Note yield falling.

Overnight:

Dow Jones -0.03%.  SP500 +23%.  Nasdaq +0.44%.  Small Caps +-0.24%.  Banks -0.19%.

SP500:

SP500 was up modestly and at the top of its trading range.   American market is closed for Thanksgiving on Thursday evening Oz time.

Commodities:

Commodities Index -0.37%.  Energy -0.44%.  Base Metals +1.26%.  Gold -0.1%.  Iron Ore +4%.

Overnight Oz Futures +0.1%.

Australia's ASX200 was down a little yesterday -0.15%%.  Expect more of the same today.  We'll probably see the miners up while banks will be down.

Wed. p.m. 24/11/21.  XJO on the negative side today in choppy trading. 

XJO finished down today -0.15%.  Today's candle shows a narrow body with upper and lower wicks - a sign of choppy trading.  XJO currently lies in the middle of its trading range.  This can go either way.

Breadth readings are suggesting that the market internals are setting up for a downside move.  Here's the Cumulative Advances-Declines chart:

The Cumulative Advances-Declines chart is collapsing.  That often results in the XJO following suit.

To add to the problems with the internals, NewHighs-NewLows have been negative today and yesterday.  That's an unusual event.  The Cumulative NH-NL hasn't yet crossed below its 10-Day Moving Average, but it isn't far off.

A break by the NH-HL CUM below its 10-Day MA would be a significant event.

The XJO remains in its trading range.  But weakness in Energy, Materials and the Banks would easily catapult the market into a bearish trend.

 Wed. a.m. 24/11/21.  Mixed results in U.S. stocks, with 10 Yr yield rising.

Overnight:

The effects of Biden's decision to re-appoint Powell as Federal Reserve Chair continued to be felt in the American market.  The yield on 10-Year Treasuries went up, so Tech stocks went down and Banks went up.  We'll see a similar effect in our market today.  Our Tech stocks were hit hard yesterday, with ATEC (the ETF tracking the Information Technology sector) down -3%, while MVB (ETF tracking the Banking industry group) went up +0.85%.

Dow Jones +0.55%.  SP500 +0.17%.  Nasdaq -0.5%.  Small Caps +0.03%.  Banks +1.57%.

SP500:

SP500 fell in the first hour of trading, then slowly pegged back the losses to finish on the positive side.  That suggests that the Powell-effect may have disappeared from traders' minds after the first hour and is now becoming a distant memory.  

The long lower wick on today's candle indicates the extent of the intra-day buying and suggests we'll see follow-through in the next session.  Enough to break above overhead resistance?  We'll have to wait and see.  Thursday - the market is closed for Thanksgiving.  Friday's action might be guided by confidence in the buying on "Black Friday" specials.

Commodities:

Commodities Index +1.81% rose strongly buoyed by improving Energy prices, +3.51%.  Base Metals down -0.65%.  Gold continued to suffer from the Powell-effect, down -0.87%.  Gold saw some intra-day nibbling as it fell down to support of the 50-Day MA.  It might stabilise around this level which is opposite a big congestion zone.

Iron Ore +5%.

Overnight Oz Futures +0.0%.

Australia's ASX200 was up strongly yesterday +0.78%.  Overnight Futures suggest the ASX200 will consolidate today around yesterday's close.   That seems a bit odd given the overnight results, but maybe our market pre-empted those in yesterday's rise.

 Tue. p.m. 23/11/21.  XJO has big upside move, but, nothing changed.

XJO up today +0.78%.

Today was a bullish engulfing candle.  That's promising. But the index remains locked in its trading range.  Until we break out of that trading range, this is a market for day-traders.

 Tue. a.m. 23/11/21.  Last hour plunge sours American stock market.

Overnight:

Dow Jones +0.05%.  SP500 -0.32%.  Nasdaq -1.26%.  Small Caps +0.66%.  Banks +1.79%.

The last hour plunge in market indices occurred just after Biden announced the re-appointment of Powell as Federal Reserve Chairman.  That suggests that the market was hoping for the more dovish Brainard to be appointed and keep the spigots open for longer.

SP500:

SP remains at the top of its range and just under major resistance of 4702.

Negative divergences on indicators suggest we'll see a test of support at 4647.

A break above resistance would indicate a continuation of the bullish trend.

Commodities.

Commodities Index +0.72% (bouncing off the 50-Day MA).  Energy +1.16%.  Base Metals +1.46%.  Gold smashed -2.24%.  The big fall in Gold suggests the market expects inflation to be contained.

Iron Ore +3.7%.

After ten minutes of trading this morning, XJO is up +0.4%.  Financials are up +0.6% with all the big four banks on the positive side.  We could have a good day on our market today.

 Mon. p.m. 22/11/21.  ASX200 remains range-bound.  Banks slump again.

XJO fell -0.59% but finished off its lows for the day.

The short-term trend is bearish.  The medium-term is sideways.  Long-term is up.  We need to see all three in sync.

ETF for Banks (MVB):

MVB broke below support at 30.77.  Next significant support level is at 29.85, which coincides (more or less) with the 200-Day MA.  If the chart gets down that far, that will probably be the end of the decline.

Today was the fifth day of declines, and the ETF is getting well into over-sold territory, so it's likely we'll see a bounce in the next day or two.

   Weekly Wrap, Week ended 19/11/21.  XJO remains range bound

Daily XJO chart:

This week, XJO was down -0.62%.

XJO has been range bound for over a month.  The upper level is 7471.  The lower level is 7312.  That's a difference of 2.2%.  That's a relatively narrow range.  Range bound markets give way to trending markets.  I wouldn't take much for the XJO to bust out of this range.

The medium term trend remains bullish (PRT bands are yellow), so position traders should maintain their current holdings.

One Week Sector Changes:

 

Despite the loss of -0.62% in the XJO this week, we can see that eight out of eleven sectors were up.  So breadth was OK.  The main drivers of the fall in the XJO were the two biggest sectors, Financials (XXJ) down -3.57%, and Materials (XMJ) down -1.65%.  Energy was down -1.53%.  (That's not much consolation to motorists who are still looking at record high prices at the petrol pump.  When Energy prices go up, petrol companies seem to pass on the increase immediately, but when Energy prices go down, it seems to take forever for this falls to filter through to the service stations.)

This week we saw some of the banks go ex-dividend, but that doesn't explain much of the parlous state of the banks.  CBA reported and fell -8.07% on Wednesday and then another -1.55% on Thursday.  That had a flow-on effect to the other big banks (WBC, NAB, ANZ).  WBC has been underperforming the market since late October.  Since 28/10/21, WBC has fallen about -15%.  BEN and BOQ have been on the nose for three or four months.  Steer clear of the banks until we see definite signs of recovery.  That may not be too far away.  CBA has now fallen down to about its long-term average, the 200-Day MA.

NewHighs-NewLows Cumulative.

For long-term investors, this is the most important chart to watch.

While the NH-NL remains above its 10-Day MA, long-term investors might feel comfortable in holding their investments.  If it breaks below the 10-Day MA, they might then take defensive action.

This chart has kept investors in this long bull market dating back to mid-2020.  It looked precarious recently when the XJO pulled back, but the NH-NL CUM didn't cross below its 10-Day MA.  The two lines are once again well apart from each other.  Long-term investments in Index ETFs look safe at this stage.

Stocks in the ASX100 above the 200-Day MA.

This chart shows that its been a tough time for investors for most of this year.  Breadth is good, but just bobbing along with not a lot of direction.  That's quite different from most of 2020, when the market had two distinct trends, the first one down (covid) and then the next one up (optimism about recover).  For most of 2021, however, its been up and down without any clear direction.  Maybe that will change in 2022.

Strong Stocks v Weak Stocks.

This is a development of my own making.  I mark up all the stocks in the ASX100 according to seven criteria.  Any stocks positive on all 7 criteria are regarded as Strong Stocks (SS).  Any stocks negative on all 7 criteria are regarded as Weak Stocks (WS).

This week saw a turn-around in the SS v WS.  In the previous week the Ratio was flat 10/10.This week the Ratio of SS v WS was 16/8.   That's consistent with the Sector analysis above showing eight sectors up and only three down for the week.

This is a measure similar to the NH-NL Cum (above).  It's a good guide for position traders rather than long-term investors.  While the Strong-Weak Cumulative chart remains above its 10-Week MA, position traders can continue to hold Index ETFs.  The only time this chart was in trouble this year was back in late March when XJO had a significant pullback.

Conclusion:

Our market remains range-bound, although some positives are emerging, with  breadth looking better than the negative result for the XJO would suggest.  While the two biggest sectors (XXJ and XMJ) remain under pressure, our market will have trouble making headway - but there are plenty of opportunities for stock pickers.

Those fears have abated this week, but remain lurking in the shadows.

The Federal Reserve announced its long-awaited taper - which didn't spook the markets and the Australian Reserve Bank maintained its long-term low-interest rate policy but jettisoned one of its bond market policies.

 Sat. 20/11/21.  Dow down, Nasdaq up.  The world is topsy-turvey.

Overnight:

Dow Jones -0.75%.  SP500 -0.14%.  Nasdaq +0.4%.  Small Caps -1.11%.  Banks -1.28%.

Such variance in activity in the Dow and Nasdaq usually means some activity in interest rates.  Lower rates (bonds higher) are good for Technology stocks which tend to be more leveraged than Industrial stocks.  Looking to Treasuries, 20-Year Treasuries were up last night, +1.06%.  That result is also poor for banks, so the banks went down.

SP500:

SP500 remains stuck at overhead resistance.  Wait for a break, up or down.  Up - above 4707, down - below 4647.

Thursday is Thanksgiving in America - a national holiday and the stock market is closed.  Friday brings "Black Friday" when shoppers splurge - or not.  It provides an indication of confidence in the economy and can be market moving.

Commodities:

Commodities Index -1.6%.  Energy -3.21%.  Base Metals +1.83%.  Gold -0.76%.

Our market will probably take its cue from the Dow Jones when it opens on Monday, i.e., opening on the down side.

 Fri. a.m. 19/11/21.  Mixed results from U.S. markets.

Overnight:

Dow Jones -0.17%.  SP500 +0.34%.  Nasdaq +0.45%.  Small Caps -0.36%.  Banks -0.37%.

SP500:

SP500 remains tethered to overhead resistance.  

This session saw a remarkable fall early in trading then a strong rebound, with the SPX finishing in positive territory.

Watch for a break above the current level for further upside movement.

Commodities:

Commodities Index +0.33%.  Energy +0.62%.  Base Metals +1.07%.  Gold -0.32%.

Iron Ore -3.1%.

Overnight Oz Futures are up marginally +0.1%.  That suggests we'll have an indecisive opening today.  Intra-day buying in the U.S. does, however, suggest we'll some optimism in trading today.

 Thu. p.m. 18/11/21.   ASX200 up marginally today.

Today's action was interesting.  Our market was weak early but then recovered to be up marginally.  It has bounced off the 50-Day MA which is a positive.

The Index remains in a sideways consolidation.  Wait for a break-out, one way or another.

 Thu. a.m. 18/11/21.  U.S. markets fall overnight.

Overnight:

Dow Jones -0.58%.  SP500 -0.26%.  Nasdaq -0.33%.  Small Caps -1.04%.  Banks -1.14%.

SP500:

SP500 remains in a narrow trading range: 4647 to 4702.  Watch for a break-out from the range.

Commodities.

Commodities Index -0.89%.  Energy -2.22%.  Base Metals -1.01%.  Gold +0.91%.

Australia looks to a flat opening today after yesterday's big fall.