Finspiration Australia. Weekly Wrap, week ended 18/2/22.

    XJO was flat this week.  Bearish conditions remain.

XJO Monthly Chart.

XJO has been in a down-trend since September, 2021.  

In January, the monthly chart showed a sell signal for both the Supertrend (1.5/7) and the 8-Month EMA.

After three weeks of February, the February XJO candle has risen marginally above the 8-Month EMA but not above the Supertrend.   On this chart, XJO is about 20 points above the 8MEMA.  That's not much of a buffer.

If it can hold above the 8-MEMA, the XJO could be OK.  We have one week left in the month.

I'd like to see the Hull Moving Average turn positive (blue dashes change to yellow dashes) before taking action  Wait.

Weekly Chart.

XJO was flat this week, +0.06%.  The long upper wick on this week's candle indicates intra-week selling.  Not a great sign for the market.  It remains below both the 8-Week EMA, the 50-Week MA and Supertrend (1.5,7).  The Hull Moving Average remains negative (blue dashes).  

Daily Chart.

XJO continues to fail at the resistance of the50 and 200 Day MAs which lie in close proximity.  XJO is marginally below the 8-Day EMA.  It remains above the Supertrend (1.5,7) and a major support level.   

Watch for a break one way or the other above resistance or support.

On Friday night, the major American stock market indices were down for the second day in a row.  So we will probably follow suit on Monday.  

Deteriorating conditions in the Ukraine on Saturday will probably unsettle markets further on Monday.

Sector changes this week.

Sector changes this week tell a story of a market afraid of more downside.  XGD (Gold Miners) which is an industry sub-group within Materials (XMJ) performed exceptionally well this week, up more than +9% as we saw a flight to safety in Gold.  

The other best performers this week were all defensives.  Health (XHJ +3.95%, Consumer Staples (XSJ +2.2%) and Property (XPJ +3.04%)

Six sectors were up, while five were down.  Financials (XXJ +0.33%) helped to keep the broad market on an even keel.

We are in the middle of Reporting Season and that is seeing many marked changes in the price of particular stocks this week.  Among big changes in top 20 stocks this week were: Wesfarmers down -4.53%.  CSL up +6.87%.  FMG down -13.05%.  NCM +7.22%.  XERO down -6.91%.  

Ouside the Top 20 but still a blue chip stock, we saw QBE fall -8.48%.

Reporting season can be a hazardous time to be in particular stocks especially when bearish conditions prevail.

New Highs - New Lows Cumulative.

NH-NL Cumulative this week dipped below its 10-Day Moving Average.  Until we see a decisive move back above the 10-Day MA, it is best to stay defensive.

Weakness in the NH-NL Cum is confirmed by my weekly Strong-Weak Stocks Cumulative chart.

S-W Cum tends to act a little earlier than NH-NL Cum, but NH-NL Cum has an advantage in being compiled on daily data rather than weekly data.

Bonds versus Stocks.

The Stocks/Bonds Ratio chart shows a clear advantage of stocks over bonds this week.  Remember this is a relativity indicator - it doesn't mean that stocks did well - just better than bonds.

The chart has reached the upper level of its range set back in November, 2021.  So we can expect a reversion to the mean, where bonds do better relatively than stocks.  Given the bearish conditions that prevail, neither will do particularly well

Stocks above key moving averages - last week and this week.

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:  Last week 49%.  This week 52%.

ASX100 stocks above 50-Day MA: Last week 36%.  This week 39%.

ASX100 stocks above the 200-Day MA: Last week 40%.  This week 43%.

Those are marginal improvements over the course of this week.  Until we see all of these above 50%, it's best to assume we are in bearish conditions.

Conclusion.

Stock markets are faced with several head-winds.  Inflation is on the lips of most analysts.  With Inflation at multi-year highs, it seems inevitable that Central Banks will be raising interest rates.  That's a negative for growth stocks in particular which tend to be highly leveraged.  The market is also faced with the uncertainty of the Ukraine/Russia situation which seemed to ratchet up a notch this week-end.

I'm inclined to reduce holdings in both stocks and bonds, and perhaps take a small position in Gold Miners and the XJO Inverse ETF BEAR.

Good luck and good investing.