27/8/23. Weekly Finspiration Repor

STW Monthly Chart  (ETF for XJO)

 

 For the month of August (so far) STW is down -3.67%.

It's been range bound since November 2022.  So - if your portfolio is making money this year - you've done well.

Range 63.06-68.29, that's a range of 8%.

STW Weekly Chart.  (Tracking ETF for the XJO)

The range in STW since March has tightened up even more:  the range is 5%.  63.12-66.76  

That's a very tight range over such a long period of time.  It provides a handy guide now for going long or short when the Chart breaks out of that chart.  We still have September and October to negotiate which often result in stomach wrenching drops.  Wait and see.

This week, XJO was a down modestly, -0.46%,  STW down -0.4%.

Sector Performances this week.

 

 Three sectors up this week, but one of those (Financials) just positive +0.04%. Gold Miners, a sub-section of Materials is the standout on the above chart +3.81%.  

 

Best performing sector was Discretionary +1.78%.  If people are pulling in their belts due to cost of living, it's not showing up in the Discretionary Sector - but, then, the stock market tends to be forward looking, so it could be a positive sign.  (Perhaps all those politicians making mileage out of cost-of-living should enjoy their few moments of glory.  Then they'll be looking for the next issue to belly-ache about.)

 

Property was the other positive performer +0.34%.

 

Worst performer was again Health -2.73%.  Utilities was the other poor performer -2.25%.

Momentum.

 I use RSI from three different time scales to measure relative changes in momentum:  monthly, weekly and daily.

Using this I sort Sectors into Bullish, Bearish, Pull-back and Counter-trend rally.

Bullish:  Discretionary, Property.  (Last week, only Property was in the Bullish group).

Bearish:  Financials, Materials, Energy, Telecommunication Services, Staples, Utilities, Industrials, Gold, ASX200.

Counter-trend Rally:  Health.

Pull-back:  Information Technology.

It's probably best to avoid stocks in the Bearish Sectors, and look for opportunities in the Bullish, Pull-back and Counter-trend Rally Sectors.

100 Leader Stocks above their 200-Day, 50-Day and 10-Day Moving Averages.

Above their 200-DMA:  last week 46%, this week 31%.

Above their 50-DMA:  last week 43%, this week 33%.

Above their 10-DMA:  last week 24%, this week 33%.

Those figures are poor.  Short-term, an improvement has been seen (stocks above 10-DMA) but not enough to get excited about.  The longer-term readings remain bearish and getting worse.

Inter-market Correlations.  Bonds/Stocks

 

The most watched inter-market correlation is the Bond/Stock correlation.  Unfortunately, the correlation is not a stable one.  A positive correlation existed for most of the 20th Century:  i.e., bonds up, stocks up; bonds down, stocks down.

For most of this century, the correlation has been negative.  Bonds down, stocks up; bonds up, stocks down.

Then, in 2020, inflation raised its ugly head, and the correlation is again positive.  Bonds down, stocks down.  And that's where we are now. 

The general trend is down with the occasional counter-trend rally.  The chart is currently at a multi-month low.

Money Flow Index is at an extreme low level.  Rarely does MFI get below 20 before having a knee-jerk reaction back to the upside.  So we could be looking at a move up in the price of bonds in the near future (interest rates down) - that would be a positive for stocks.  This could be a warning sign that stocks are likely to enter an upside move.  This is not a timing mechanism - but a warning signal.

Conclusion.

The Australian stock market has been range bound in a relatively tight range for most of this year.

Watch for a break-out of that range.

The current out-look is murky - bonds could be signalling a move to the upside for stocks.  But I'll wait and see how the charts turn.

If all goes to plan, we should see a rebound this week off the lows, which could carry through towards the end of September.

Keep your fingers crossed - and follow the charts.