20/8/23. Weekly Finspiration Report.

 

STW Daily Chart.  (A tracking ETF for the XJO)

STW broke down from the bear flag which formed the previous week on low volume. 

This break down has followed the script almost perfectly.  On Thursday, STW reached support which was the level predicted last week using technical analysis.  Friday showed some intraday buying which resulted in a marginal rise for the day, up +0.02% on the STW.  XJO was up just +0.03%.  For the week, XJO was down -0.262%.

This is what I said last week:

The standard measure rule is to take the distance from recent high to the start of the bear flag and project that to the downside from the top of the flag.  That takes the measure rule down to a major support level at 64.62. 

STW finished the week at 64.60 - almost exactly on the predicted level.

STW is now at support.  It has finished level with a High Volume Node and a Horizontal Support line.  That level is also the lower level of the Value Zone for the STW.  That is marked by the big gray rectangle on the chart.

That suggests that the next movement will be to the upside.

Sector Performances this week.

 

 Two sectors were up this week, Property +1.43% and Health +0.96%.  Some stocks in those two sectors performed well this week, some not so well.  Stock picking in those two sectors might pay dividends but not all stocks performed well.

 

Two other sectors performed relatively well, although finishing on the negative side, Utilities -0.1% and Energy -0.3%.  There is often a good correlation between Utilities and Energy.

On the nose were the two biggest sectors, Financials -3.61% and Materials -4.32%.  Gold Mining which is a subset of Materials performed poorly -4.67%.

Momentum.

 The above graph shows the RSI for each sector from the current monthly, weekly and daily charts.  It's a relatively quick way of assessing momentum.

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

Bullish:  Property.

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

Counter-trend Rally:  Health.

Pull-back:  Discretionary.

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 62%, this week 46%.

Above their 50-DMA:  last week 51%, this week 43%.

Above their 10-DMA:  last week 41%, this week 24%.

That figure for stocks above their 10-DMA (24%) is getting back down to levels last seen in June/July and March.  Each time the market rebounded.  This is not a very precise technical analysis signal - signals based on weekly data rarely are - but may give a timely warning to look out for a bounce.

Pre-election Year Seasonality - U.S.

 America is now in the third year of Biden's presidency, i.e., in the pre-election year.

The pre-election year of the Presidential cycle is by far the best performing year in the four-year cycle.

Average Performances for the SP500 for each year of the presidential cycle are:

Year 1 - 6.7%,  Year 2 - 3.3%.  Year 3 - 13.5%.  Year 4 - 7.5%.

It's interesting that on Average the worst month of the year (all years) is September.   But in the 3rd Year of the Presidential Cycle, the worst month is October.  

So, on that basis we can expect a rise in the American market from now towards the end of September, than a fall back in October.  November is then flat, followed by a strong Decembert.

That is by no means a fool-proof recipe for trading.  Other factors must be taken into account.  Use technical analysis to judically adjust exposure.

Conclusion.

This week has played out almost exactly to the technical analysis script presented the previous week.

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.