Finspiration Australia. Weekly Wrap, week ended 25/2/22

     XJO was down this week.  Worst performance since October, 2021.

XJO Monthly Chart.

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

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

At the end of February (one day to go), the February XJO candle remained below the 8-Month EMA and below the Supertrend.   

I'd like to see the Hull Moving Average turn positive (blue dashes change to yellow dashes) before taking buy action.  For long-term investors - stay defensive.

Weekly Chart.

XJO was down this week, -3.1%.   It remains below the 8-Week EMA, the 50-Week MA and Supertrend (1.5,7).  The Hull Moving Average remains negative (blue dashes).  

Trends are down on all time-frames.  Stay defensive.

Daily Chart.

XJO on Thursday broke down from its consolidation zone.  That took it down to a minor Support/Resistance Zone.  Tuesday saw an early warning of further downside when the Supertrend switched from yellow to blue (bearish).

Friday's action in the U.S. suggests we'll see a big upside move on Monday which should result in a test of the recent large consolidation zone.

That will look promising for the market, but the XJO still has very strong resistance levels above the current level.  Stay defensive.

Sector changes this week.

Only three sectors were up this week.  Two of those were defensives.  Best was Consumer Staples (XSJ) +3.39%.  Utilies (XUJ) up +1.67%.  Energy (XEJ) +0.72% benefitted from supply disruptions due to the Ukraine/Russia crisis.  XGD (Gold Miners) which is an industry sub-group within Materials (XMJ) performed positively, up 1%.

The worst three performers were Consumer Discretionary (XDJ) -6.09%, Materials (XMJ) -4.59%, and Financials (XXJ) -4.31%.  XMJ and XXJ are the two biggest sectors of the market making up about 40% of the ASX, so it's no wonder the XJO was down heavily.

CIMIC which has been in a steep down-trend received a take-over offer which sent its price up >33%.  Nice for those long-suffering investors who held on to Cimic.

New Highs - New Lows Cumulative.

NH-NL Cumulative this week fell clearly below its 10-Day Moving Average.  Until we see a decisive move back above the 10-Day MA, it is best to stay defensive.  This is a good indicator for long-term investors.

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 small 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.  But there's not much in it.  The chart finished above zero (stocks doing better than bonds), but below its 10-Day MA, so any advantage for stocks is disappearing

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 43%.  This week 38%.

ASX100 stocks above 50-Day MA: Last week 39%.  This week 32%.

ASX100 stocks above the 200-Day MA: Last week 52%.  This week 28%.

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 may be reaching a conclusion, with Russian forces encircling Kyiv.

I'm inclined to remain defensive, having reduced holdings in bonds and stocks this past week.  

Good luck and good investing.