29/1/23. Weekend Report - The Week That Was. Week Ended 27/1/23.
Stock Market Adage: "As goes January, so goes the year." Described first by Yale Hirsch in 1972, since 1950 it has an 85.7% accuracy.
Chart Analysis on this Blog is purely descriptive. It is written for informational and educational purposes and should not be taken as financial advice. Do your own research or seek advice from a Registered Financial Advisor.
This week saw further upside in the broad market.
XJO Monthly Chart.
XJO has been up +6.47% in January with one more trading day to go. The Index is above the 8-MEMA, Hull MA13, 50-MMA, 200MMA, Supertrend (7/1.5). Supertrend was the last domino to fall. If it remains bullish into the end of January (and I see no reason why it shouldn't), we can say we have a new bull market on our hands.
Monthly RSI is at 57.46
XJO Weekly Chart.
8-Week EMA, Hull MA13 and Supertrend are all heading to the upside.
Weekly RSI is at 64.73. That's above the Monthly RSI of 57.46, which indicates bullish XJO momentum.
XJO Daily Chart.
XJO has been in a strong up-trend since early January. Daily RSI is now at 70.83 - that's overbought. The last time XJO had an overbought reading was back in early December, 2022, which precipitated a fall back to the 200-Day MA. Watch the market here for a pull-back. I'd expect support at the 50-Day MA, which would be about a 50% retracement of the recent rise.
Monthly, Weekly and Daily RSIs. - Sectors + XJO + Gold + Composite Bonds
The above column chart shows the Monthly, Weekly and Daily RSIs for each sector. This provides information re momentum and investor sentiment.
XDJ and XJO are short-term overbought with RSI >70. Expect consolidation or a pull-back in the coming week.
XXJ with an RSI at 69.88 is close enough to 70 - so we can expect consolidation or a pull-back for that important sector.
In the previous week, XMJ was overbought (>70 RSI).
Here's the daily chart for XMJ:
BHP has recently been the strongest sector in the ASX. Both times recently when RSI for BHP went above 70 small pull-backs occurred, but no change in trend as indicated by the 8-Day EMA and Supertrend (7/1.5). An overbought reading doesn't necessarily mean a trend reversal, particularly when the market is in bullish mood.
NewHighs-NewLows Cumulative.
NH-NL Cum is represented by the blue line. It is now above the 10/21/34 Day Moving Averages. The 10-DMA is above the 21-DMA and 34-DMA. This is a very bullish configuration. While the NH-NL CUM remains above the 10-Day MA, long-term investors can fell comfortable about their investments.
I've developed another long-term metric "StrongStocks-WeakStocks" which is similar to NH-NL but gives signals a little earlier than NH-NL SS-WS is up for the 11th week in a row and has moved well above its 5-Week MA. This week there were 25 Strong Stocks and 1 Weak Stock. That's not quite as strong as the previous week but still a very good result.
% of Stocks above key moving averages.
1. % of stocks above 10-Day Moving Average: Last Week 66%, This Week 70%.
2. % of stocks above 50-Day Moving Average, Last Week 77%, This Week 75%.
3. % of stocks above 200-Day Moving Average, Last Week 64%, This Week 69%.
All three indicators are bullish hovering around the 70% level.
Overbought for the market occurs when % of stocks above 200-DMA rises above 80%. We're not there yet.
Conclusion.
January has done well for the XJO and most Sectors are now giving bullish momentum readings..
XJO is overbought with an overbought RSI >70. XDJ is also >70.
Although XMJ has recently recorded a couple of RSI above 70, pull-backs have been muted, indicating a strong bullish market.
Internal strength (breadth) remains strong.
All trends end eventually as this one will, but we're not seeing any convincing evidence as yet. Stay with the trend.
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