Tue. a.m. 1/2/22. U.S. markets up strongly.
Overnight.
SP500.
Commodities.
Iron Ore -4.2%.
Those Iron Ore and Base Metals prices will put our miners under stress today.
RBA meets today to decide interest rates. No change is expected.
After 40 minutes of trading XJO is up +0.35%.
Mon. p.m. 31/1/22. XJO finishes down modestly.
The following sectors were positive today: Energy +1.35%, Consumer Discretionary +1.25%, Health +0.83%, Information Technology +3.69%, Communication Services +0.63%, Real Estate +1.35%.
The biggest sectors, however, were both down. Materials -0.45%. Financials -1.83%.
Until those two sectors start to fire, our market will be under stress.
Is this as bad as it gets?
XJO Monthly Chart.
The monthly candle has bounced off major support - so it's possible the selling has ended, but unlikely.
Weekly Chart.
So - XJO is now locked between two major support/resistance areas. The most likely scenario will be for the XJO to test resistance at 7168 and then fall again. XJO is currently at 6988.
Daily Chart.
Friday's action shows a bullish engulfing candle which is a strong short-term signal.
RSI(14) was at 23.6 on Thursday which is extremely over-sold, so a bounce to the upside was not unexpected. Plus, major support had held on Thursday. More short-term upside can be expected.
But serious resistance lies over-head: Supertrend(1.5/7), 10-Day SMA and major horizontal resistance.
It will take a lot of "oomph" to get past those and back into the old trading range. Not impossible - but difficult.
Sector changes this week.
Seven sectors were down more than -2%.
New Highs - New Lows Cumulative.
This is different from events back in Nov/Dec when breaks were marginal and NH-NL Cum went going sideways rather than falling.
This decisive break is another "sell" signal confirm the "sell" signal from the Monthly Chart (above).
Strong-Weak Stocks has also crossed decisively below its moving average signal line, confirming the signal from NH-NL Cum.
Stats for S-W stocks this week were: Strong Stocks 3, Weak Stocks 39. Net S-W = 36.
Because of the nature of the criteria I use to determine Strong and Weak Stocks, it is almost impossible for Weak Stocks to number more than 50, so a number of 39 Weak Stocks is a powerful indicator of just how weak our market has become.
As bad as it gets? Probably, for now.
Bonds versus Stocks.
On a relative basis Bonds are currently trouncing stocks as the above chart shows. That doesn't mean you wouldn't lose money in Bonds - just, you would lose money a lot less slowly in bonds than in stocks.
Another way of looking at it - an increase in allocations to bonds would slow the losses in your overall portfolio.
How bad is it?
A look at the number of stocks in the ASX100 above key moving averages provides an idea of how bad thins are.
ASX100 stocks above 10-Day MA: 6%.
ASX100 stocks above 50-Day MA: 20%.
ASX100 stocks above the 200-Day MA: 32%.
Short-term it couldn't get much worse. But in the long-term it could still get worse, in a Bear Market we would expect ASX100 stocks above the 200-Day MA to fall below 20%. We're not there yet - but maybe we're not in a Bear Market, yet.
Conclusion.
Expect a relief rally in the coming week. But, we are no longer in a "buy-the-dip" scenario. The odds have now switched to a "sell-the-rally" scenario.
Take care, and safe trading.
Apple reported after the U.S. market closed early Friday morning (Oz time), which produced a rise in U.S. Futures. The Australian market, when it opened on Friday, drew encouragement from the U.S. Futures and finished well up at the close on Friday, XJO +2.19%. Apple (+6.98%) and Visa (+10.6%) both rose strongly in Friday trading in the U.S. which lead to big jumps in the major U.S. indices, Dow Jones +1.65%, Nasdaq +3.13%.
Bonds in the U.S. were also supportive of stocks with the yield on 10-Year Treasuries falling -1.68% (prices for 10YT rising),
Yesterday in Australia.
XJO is still a long way below the 200-Day MA and we can see a major resistance level at 7189. XJO finished Friday at 6988. Then we have the massive old trading range which will also provide resistance.
We'll have to wait and see how this bounce goes - and be ready to sell into any advance.
Overnight.
SP500.
Friday's action in the U.S. erased the past three days' losses in the SP500. That takes the Index back up to resistance of the 200-Day MA and the Tenkan Sen (mid-point of the past nine days). If that can be overcome, triple resistance lies ahead: major horizontal resistance, Kijun Sen (mid-point of the past 26 days) and the lower edge of the Ichimoku Cloud. Tough stuff.
Commodities.
Fear and Greed.
Despite the correction that has occurred in the SP500 (i.e., more than -10%), the Fear and Greed Index hasn't fallen into the Extreme Fear quadrant which usually precedes substantial rises in the major U.S. indices. We might have to see Extreme Fear before we can presume we've seen "the" bottom in this market.
Overnight:
Indices were well up early in the day, faded in the middle session, and stayed low in the afternoon.
SP500.
RSI(14) remains extremely ovcr-sold with a reading of 24.3. CCI is show a porisitve divergence from price, so a move to the upside seems likely. Any significant bounce will probably be sold into.
Commodities.
Iron Ore +0.5%.
XJO surged at the opening but has now fallen back a little to be up +0.7% after 30 minutes of trading.
Apple Inc. reported good results after the U.S. market closed and Dow Futures are up 200 points, so that probably explains the positive opening in Australia this morning. After 40 minutes of trading, XJO is up only +0.2%. This is looking like a repeat of yesterday.
XJO finished down today -1.77% after being up more than +0.9% after the opening. (What were they thinking of?). A rally in the afternoon carved more than 1% of the losses at 1.15 p.m. but that did little to save the XJO from a massive loss today.
Advances/Declines were nowhere near as bad as they have been in the past four days. A/D ratio today was 0.31% - a lot better than Tuesday's ratio of 0.13%, but a long way from the mid-09nt of 0.5.
Today saw extremes which haven't been seen for a long time. NewHighs-NewLows came in at -115, We haven't seen triple negative figures for NH-NL since the bear market of 2020.
Rate of Change Difference between Bonds and Stocks is also at levels we haven't seen since the bear market of 2020.
This graph compares the rate of change of stocks compared to bonds. Bonds are clearly out-distancing stocks in Rate of Change. That's not a lot of solace as Bonds are also in a down-trend - just nowhere near as severe as stocks.
All of this suggests we're getting close to a low. But until we see definite signs of a low - it's best to leave the bottom pickers to try to catch falling knives.
So far, the XJO is down more than -11% since its high on 5 January to the low of today. That's "officially" in correction.
Overnight.
European stocks finished higher last night, STOXX600 +1.68%. Europe closed before the Federal Reserve's announcement. American stocks were also positive at that time, but fell after the Fed's announcement.
Dow Jones -0.38%. SP500 -0.15%. Nasdaq +0.02%. Small Caps -1.47%. Banks +0.28%.
SP500.
Commodities.
Iron Ore +0.2%.
After 15 minutes of trading this morning, XJO is up +0.8%, defying the down trend in late trading in the U.S.
Overnight.
SP500.
The SP500 is extremely oversold with RSI(14) at 25.8.
All of this points to the probability of a move to the upside. Tuesday's action suggests that major participants are anticipating a move to the upside - no matter which way the Federal Reserve decides to go.
Commodities.
All four charts show a bull flag with a break to the upside last night. That's a positive for the Australian market.
Australia is closed for a public holiday today. We'll have to wait till tomorrow to take action on the decision of the Federal Reserve.
XJO down today -2.49%.
XJO is in a steep down-trend and extremely oversold with RSI(14) at 27.16. Below 30 - we can expect a relief rally in the next day or two.
Today looked like capitulation to me. All eleven sectors were down. NewHighs/NewLows came in at 3.09%. It can't go below 0. Advances?Declines came in at 12.5%. Another very low reading. In the ASX200 (XJO) we had 9 Advances and 185 Declines. That's a figure of 4.64% Can it get any worse. Possibly - but not much.
The Australian VIX (Fear Index) reached a one year high today and finished at 18.54.
In European markets, Germany is currently up a little, about +0.1%. UK is up +0.22%.
The Federal Reserve is meeting this week. What they decide may determine the future of the stock market. If inflation remains their primary focus, we could see more declines in the stock market. If they hold off given the parlous state of the stock market, we may get a rebound.
Overnight.
MarketWatch, a U.S. market commentary site, described the turnaround as one for the ages, best since 2008.
SP500.
This is following the script I set out in my Weekly Wrap on Sunday. This turn-around has come out of nowhere. What's changed? The Fed will continue raising rates. Covid continues to cause concern. International tensions over Ukraine/Russia and China/Taiwan remain.
At the moment, Bulls are cheering, Bears are gnashing their teeth.
We'll have to wait and see if my script plays out to the end.
After 25 minutes of trading, Australia's XJO is down more than -1%. So our market doesn't believe in the big turn-around
XJO down today -0.51%.
Best sectors today were, XSJ +0.36%, XTJ +0.22%, XPJ +1.45%. That's not much encourgagement for the bulls as those three segments are all defensive segments.
We're likely to see a bit more upside, but - that should be a chance for longs to adjust their positions.
Ozzie market back to low of old trading range.
(Note: Much of today's chart analysis uses terms from the Japanese Ichimoku trend following system. If you are unfamiliar with Ichimoku, you can find good explanations here and here.)
XJO Monthly Chart:
XJO Weekly Chart:
For long-term investors, this is one of the most important charts to watch.
Sat. 22/1/22. Down, down, prices are down
Yesterday in Australia.
Yesterday also smelt like a capitulation day. Breadth was woeful, 284 shares were up, 1278 shares were down, an Advance/Decline ratio of 0.18. It's a long time since we've seen such a poor ratio in the Advance/Decline ratio. Volume was also high, but not excessively so. 6.8 million shares were traded. That's the highest since 8 Nov. last year. That's not much of a guide as XJO printed a narrow range day close to the top of a short-term up-trend. Today's action was a wide range day at the end of a short-term down-trend.
Money Flow Index on STW (a tracking ETF for the XJO Index) is showing a positive divergence from price, so STW may be close to a bottom.
Trying to predict a "bottom" when sentiment is so negative, is a recipe for failure. We'll need to see evidence of a bottom before plunging into the prediction game. But - hope springs eternal - we may be close. Major reversal usually spring up out of nowhere.
Overnight.
RSI(14) is below 30 on DJ, SPX, Nasdaq and Small Caps. That's extremely oversold, so we are not far off a low. But as the Guru on the Mountain maintains, oversold can become more oversold.
SP500.
We need to see signs of a low forming, before plunging into a prediction of an end to this downside trend.
Commodities.
Commodities Index +0.09%. Energy +0.38%. Base Metals -1.29%. Gold -0.33%.
US 10Yr T-Note.
Well, last night, 10-Year Treasures rebounded after showing some lovely positive divergences on some of the indicators.
Super Trend (1.5/7) has given a short-term buy signal for Treasuries. Maybe stocks will take notice and also move to the upside. That's the first positive sign we've had that a low could be forming for stocks.
Market Volatility.
It is now giving off "overbought" readings on RSI(14) and CCI. We might need to see negative divergences on those indicators (as seen in Dec. 2021) before expecting a reversal.
Conclusion.
Stock markets are in strong down-trends. Reversals can appear apparently out of nowhere.
We're not yet seeing strong evidence that a low has been reached, although some indices are at major support levels and Treasuries have kicked to the upside.
Continue to wait until we have strong evidence that this down-side move has ended.
Fri. 21/1/22. America started positively, then imploded.
Overnight.
At noon, indices were well on the way to erasing all the losses of the previous day. Then the slide began which accelerated in the last hour of trading sending the indices into bearish territory.
SP500.
RSI is now oversold at 31.6. Below 30 usually results in a rebound.
Wait.
Commodities.
Iron Ore up again +2.6%.
After 25 minutes of trading today, XJO is down -1%.
Thu. p.m. 20/1/22. Oz market defies fall in America.
XJO up today +0.14%.
XJO found support at the 200-Day MA and the top of the Ichimoku Cloud.
It was down early in trading, but intra-day buying took the Index back up into positive territory.
Despite the positive final result, our market was seriously skewed. Only four sectors were up.
Energy +0.8%
Materials +3%
Health +0.3%
Utilities +0.5%
The positive result was clearly dependent on the resources. Utilities tends to benefit from increases in the price of Energy.
Unless we see a return to favour for the XXJ (Financials), this market remains fragile.
Today's action was promising.
Despite what you hear on the press, XJO often leads overseas markets. Today's action might be a case in point. Currently, both German and UK are showing solid if unspectacular gains.
I feel confident that the current pull-back is over. But we need to see follow-through buying tomorrow.
Technically, that's a positive result. We need to see upside buying tomorrow.
Mixed Results in New York. Energy up. NAB ex-dividend today. Dow Jones +0.16%. SP500 -0.08%. Nasdaq -0.11%. Small Caps -0.07%. Banks -0...
