Finspiration Australia. Weekly Wrap, week ending 1/4/22.

          XJO up again this week.  

XJO Monthly Chart.

March was a good month for the XJO, up +6.39%.   The index had been in a down-trend since September, 2021 that has now switched to an up-trend with the Hull MA13 switching from blue to yellow and the monthly candle finishing well above the 8-Month EMA.  The Hull MA is confirming the trend change on the 8-Month EMA - that's usually a reliable signal.

Weekly Chart.

XJO was positive this week, +1.18%. That's the third week up in a row - which could be stretching the friendship a little too far.

The chart, however, is unequivocally bullish.  It has moved above the 8-Week EMA, Supertrend (1.5/7) has flipped to bullish and the Hull Moving Average has also flipped to bullish (yellow dashes)

Daily Chart.

This week, XJO moved above a key horizontal resistance level 4720.  On Thursday and Friday, it fell back a little to test that level.

CCI is beginning to show negative divergence, so a pull-back may be coming soon.  A drop back to test the 200DMA and then bounce would be very bullish.  

At this stage, XJO remains bullish.  If we get a pull-back be prepared to buy-the-dip.

Sector changes this week.

Eight sectors were up this week, three negative.

Materials (XMJ) dominated the Australian market this week,  Materials +3.65%.  XMJ hit an all-time high this week - that suggests we'll see more upside.  

Gold (XGD), BEAR (ETF inverse of XJO) and IAF (Multiple Bonds) all performed poorly in the past week.  These tend to be safe havens when the market tanks.

New Highs - New Lows Cumulative.

NH-NL Cumulative this week broke above its 10-Day Moving Average, although the upside break isn't particularly convincing.

Strengthening in the NH-NL Cum is confirmed by my weekly Strong-Weak Stocks Cumulative chart.  It has been above its 5-Week Moving Average for the second week in a row.  That's a bullish sign.

These are good guides for long-term investors.

Advances-Declines Cumulative.

A-D Cumulative has risen above both its 10-Day and 20-Day Moving Averages.  That's a bullish development.  That complements the view from the Weekly XJO chart - and confirms the bullish bias of our market.

Bonds versus Stocks.

At the end of the week, Stocks had a clear advantage over Bonds.  That's consistent with the strong rally we've had the past two weeks.   

This can act as a contrarian signal.  If stocks are acting too strongly compared to bonds, we may see some change in the relativities between stocks and bonds.  The ratio is now the highest it's been since November, 2021.  It can, of course, go higher, but the higher it goes brings it closer to a reversal.  The Ratio does appear to be faltering, so a pull-back in stocks might be in order.  That is consistent with the negative divergence in the CCI (noted above).

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/good things are.

1.  ASX100 stocks above 10-Day MA:  Last week 79%.  This week 62%.  

2.  ASX100 stocks above 50-Day MA: Last week 54%.  This week 70%.

3.  ASX100 stocks above the 200-Day MA: Last week 41%.  This week 50%.

This is the first time in many weeks that all three measures have been at or above 50%.  None is at an extreme level (above 80) so continuation of the up-trend seems likely.

The drop in the number of stocks above the 10-Day MA is consistent with the weakness we saw at the end of this week.

Conclusion.

We've had three weeks of strong gains.  The weekly and daily charts are unequivocally positive.  Of course, if it's that positive we're likely to see a change in sentiment.  That's already being signalled by contrarian indicators such as the CCI, Stocks/Bonds Ratio and short-term breadth measured by stocks above key moving averages.  Contrarian signals should be taken as warning signals, watch market action for confirmation one way or the other.

Any pull-back is likely to be bought as the XJO is now above the 200-Day MA.

Good luck and good investing.