1/11/23. Wed. Morning Finspiration Report

 Europe up, U.S. up.  Sydney Futures up.  What could go wrong?

Dow Jones +0.38%.  SP500 +0.65%.  Nasdaq +0.48%.  Small Caps +0.79%.  Banks +1.12%.

SP500.

 Yesterday I said I'd like to see SP500 above the Supertrend line and for DZ Stochastic to break above its lower band.  Both of those happened last night.  

Next hurdle is the 50-Day SMA, and the two signal lines of Ichimoku - Tenkan Sen and Kijun Sen (Conversion Line and Base Line).  A favourable Federal Reserve report tonight might see all of those broken to the upside.  We shall see.

Commodities.

Commodities Index -0.37%.  Energy -0.36%.  Base Metals -0.76%.  Agriculture +0.5%.  Gold -0.55%.

If U.S. stocks are up, we expect to see Energy and Gold down.  That happened last night.  All's right with the world.

After 30 minutes of trading this morning, XJO is up +0.35%.
 

31/10/23. Tues. Evening Finspiration Report.

 The Ozzie market ground to a halt today.  XJO up +0.12% and plenty of intra-day selling to pull the index off its highs.

It seems that nobody want to take a risk until after the Federal Reserve hands down its interest rate decision tomorrow night (Oz time).

Momentum has ground to a halt as evidenced by a flat RSI and flat DZ Stochastic.

RSI is at such a low level that I'd have to think the only way from here is to the upside.  But - the market might have different ideas.

Despite the flat finish, eight sectors were up and three down.  Materials (XMJ) was a big drag on the market, down -1.08%.  At the other end of the scale was Property +1.06%.  

Today's bullish engulfing candle, coming at the end of a down trend, looks tantalizing.  At the very least it suggests a short-term up-trend.  Are some big punters taking a bet on the Federal Reserve holding interest rates steady?

In early trading this evening, European stocks are moderatly up.  STOXX600 +0.4%.

Dow Futures up modestly +0.26%.  Oil is also up +0.94%.  Computer says - NO.  Shouldn't happen.  Dow and Oil are usually inversely correlated.  Bond yields are down a little (price of bonds up).  That's the way it "should" be.  Maybe Oil has got it wrong.  

Good luck.

31/10/23. Tues. Morning Finspiration Report.

 American and European stocks rise.  Energy down.  Gold down.

Dow Jones +1.58%.  SP500 +1.2%.  Nasdaq +1.16%.  Small Caps +0.63%.  Banks +1.91%.

SP500

 The last two days show a two-day bullish pattern (last night's positive candle finished well above the opening of the previous session bearish candle).  The down trend restraining line has broken to the upside.  Force Index is rising.  

I'd like to see DZ Stochastic close above its lower band and Supertrend switch from blue to yellow.

Commodities.

 Commodities Index -1.6%.  Energy -2.55%.  Base Metals +0.65%.  Agriculture -0.69%.  Gold -0.56%.

After 45 minutes of trading this morning, XJO is up about +0.6%.  Ten out of 11 Sectors are up.

30/10/23. Monday Evening Finspiration Report

 XJO down -0.79% but well off its lows.  IT up +0.43%.  IT was the only Sector up today.  Materials (XMJ) finished more or less flat -0.09%.  Energy (XEJ) was the biggest drag on the market, -2.59%.  Gold Miners (XGD) up strongly +1.46%.

STW Chart:

STW remains within its Descending Bullish Wedge.  Wait for a break above its oblique restaining line.  That may not happen until after Wed. Federal Reserve interest rate announcement.
 

29/10/23. Weekly Finspiration Report.

 

XJO fell this week, -1.07%.  XJO is close to falling into correction territory, down ~9% since its high on 27 July.  

SP500 in America fell -2.53%.  SP500 is now in correction territory having fallen ~11% since its high on 27 July.

Interest rate policies here and in the U.S. are the major factors affecting the direction of the stock markets, but the geo-political events in Ukraine and the Middle East complicate and deepen bearish sentiment.

The Oz market was down three out of five days, one of those days (Wednesday) was only barely down -0.04%.  The American market (SP500) was down four out of five days.

XJO is now -5.05% below its 200-Day SMA - well into bearish territory.  SP500 is -2.36% below its 200-Day SMA.  Such conditions assume the best trading strategy is to sell any rallies.  We are, however, into a bullish seasonal time, so the received "wisdom" might be taken advisedly.

STW Daily Chart (STW is an ETF which tracks the XJO)

STW is setting up for a swing higher rally.  It is showing a Bullish Falling Wedge which has a reasonably reliable record.  MACD Histogram is showing a strong positive divergence as is the 3-Day EMA of the Force Index.

Look first for a cross by the Dynamic Zone Stochastic above its lower band and then a move by the Chart above the oblique restraining line of the Descending Wedge.

XJO Daily Chart.

XJO held up reasonably well for the first three days of the week, but sliced through important support t 7000 (round numbers) on Thursday.  On Friday, it continued down through the next support at 6957 to finish at the next important support of 6900.

Positive divergence on the MACD Histogram suggests the next move will be to the upside.

SP500 Daily

SP500 also shows a Bullish Descending Wedge.

The Index has closed in a relatively low volume zone which might be tempting for bullish traders to enter trades and push the Index to the upside.  A major resistance zone at the top of the wedge might proved a difficult level to overcome as it coincides with the Point of Control (heavy volume) on the Volume Profile over on the left of the chart.

A horizontal resistance level also lies at around 4217 which coincides with the 200-Day MA - so that may also prove to be a difficult first level to overcome.

The next Federal Reserve (U.S.) meeting is a two-day meeting on 31 October/1 November.  That may be a catalyst for a significant market move.

Sector Performances this week.

The place to be this week was in Materials, esp. the big miners.  XMJ up +0.87%.  That was the only positive sector.

The worst performing sector was the interest rate sensive Property (XPJ) -4.48%.  IT, another interest rate sensitive sector, was down -3.71%.

One Week data can be volatile and not necessarily give a good picture of medium term activity.  Mansfield Relative Strength over 52 Days gives a better understand.  MRS measures the activity of an Index against the XJO.  Above zero is positive and below zero is negative.

On this measure, Materials (XMJ) continues to win out, but several other sectors are also positive:  Financials (XXJ) Energy (XEJ), Staples (XSJ), and Utilities (XUJ). 

IT (XIJ) and Property (XPJ) remain the worst performers over this longer term.

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

• Above their 200-DMA:  last week 32%, this week 34%.
• Above their 50-DMA:  last week 21%, this week 12%
• Above their 10-DMA:  last week 19%, this week 19%.

The last time we saw only12% of stocks above their 50-DMA was back in September, 2022 - over 12 months ago.

I've marked that time on a weekly chart of XJO below:

 

 

Sept. 2022 also marked a test of the 200-Day MA.  XJO is currently in a similar situation now.  The fall in 2022 is also similar in magnitude to the current fall, about 9%.  The 2022 fall took a short time, however, than the current fall - 7 Trading Days compared to 13 Trading Days for the current fall.  

 

Given the poor performance ot the American market on Friday night, it seems likely that XJO will hit the 200DMA on Monday.  Watch for a rebound sometime in the middle of the week - hopefully after the Federal Reserve Interest Rate decision (Wed. night Oz time.)

Conclusion.

 

The Australian market has been falling heavily and is almost into correction territory (down >10%).

 

Signs exist which provide some optimism, but price action is always the final arbiter.  Watch for XJO to break above oblique restraining line of the Descending Wedge marked on the Daily Chart. 

 

 Yesterday, XJO up +0.21%, Dow Jones down -1.12%, Nasdaq up +0.38%, Energy up +1.4%, Gold up +1.16%, US Dollar flat.

Below is a weekly chart for XJO:

XJO is down -1.07% for the week.  

It is at the Oblique Supporting Trend Line and close to the 200-Week Moving Average.  That suggests we should see an upside move in the near future.  

U.S. Indices.

U.S. Indices were mixed overnight with Dow down and Nasdaq up.

Dow Jones -1.12%.  SP500 -0.48%.  Nasdaq +0.38%.  Small Caps -1.01%.  Banks -2.34%.

RSIs for Dow and SPX are both below 30 - extremely oversold.  They don't go much lower without a rebound.  It probably all depends on geo-political events.

SP500

 The 3-Day EMA of Volume continues to rise and is well above the 13-DEMA and the 20-DSMA.

That suggests we are close to a selling climax which should see a rebound.

Watch for the 3-Day EMA of Force Index to rise above the 20-DSMA and for the Dynamic Zone Stochastic fo rise above its lower band.

Commodities.

 Commodities Index +1.34%.  Energy +1.4%.  Base Metals +1.38%.  Agriculture +0.92%.  Gold +1.16%.

Gold is now into the overbought zone with a RSI at 74.53.  This may be suggesting that its state as a safe haven may be coming to an end.

Energy is sitting around its 50-Day MA, i.e., about mid-range of recent activity.  That's a bit surprising given the current turmoil in the Middle East.  A candle-volume chart, however, shows a somewhat different picture:

Energy had huge volumes Thursday and Friday, a week ago.  That suggests that the current uptrend which began when Hamas invaded Israel in early October may be coming to an end.  Those huge volume occurred at a significant resistance level.  Energy has pulled back a little since then on lower volume, but Wednesday was a very volatile day.

MAs on the Force Index (three of them) are all sitting mid-range.  This could go either way, but given the big volumes a week ago, it wouldn't take much to nudge DBE lower.  That would be a plus for the American market.

26/10/23. Thursday Evening Finspiration Report.

XJO finished down -0.61% but well off its early lows.

RSI is well oversold currently sitting at 31.18.  Currently, it is showing a small positive divergence from the low of 6 October, the date of the incursion by Hamas into Israel.  MACD Histogram also shows a positive divergence.

The index is in a long down-trend from early August, currently down -9.27%.  That's close to the "official" definition of a correction -10%.

This appears to be setting up for a rapid reversal to the upside.  Wait.

Yesterday, we saw some disappointing inflation figures - higher than expected.  That may put pressure on the RBA to raise interest rates.

RBA Governor Michelle Bullock gave a speech today which was relatively dovish - not what was expected.  As a result, likelihood of a rate hike fell to 31%.

Only two sectors were up today, Utilities +1.3% and Materials +0.14%.

Worst sector today was IT -2.56% and Property -2.07%.  Both are interest rate sensitive sectors.  I guess they didn't read the RBA memo.  :)

Europe is down heavily in early trade.  STOXX600 -0.95%
 

26/10/23. Thursday Morning Finspiration Report.

 U.S. Stocks fall into negative territory, with Nasdaq down strongly.

Dow Jones -0.32%.  SP500 -1.43%.  Nasdaq -2.43%.  Small Caps -1.26%.  Banks -0.3%.

SP500

 SP500 remains in a down-trend - but is oversold so we could see a counter-trend rally.

MACD Histogram and Force Index are both showing positive divergences, so that reinforces the idea that we will see a counter-trend rally.

Commodities.

 Commodities Index +0.73%.  Energy +1.36%.  Base Metals -0.11%.  Agriculture -0.46%.  Gold +0.42%.

Energy is usually inversely correlated to Stocks.  Energy up, Stocks down.

After an hour of trading this morning, XJO is down about -0.6% but off its lows.

25/10/23. Wed. Evening Finspiration Report.

 Well - it could have been worse, i.e., the inflation numbers today.  But they were bad enough, and blew up a promising start to the Ozzie market this morning.  XJO finished flat -0.04%.

The long upper and lower wicks on the small bodied candlestick today gives some idea of the violent jerking around suffered by the market today.

Yesterday's candle was an inside day (range inside the range of the previous day).  Today's candle remained within the range of Monday.  So nothing much has changed.  Look for a break of today's high or low for some idea of future direction.

25/10/23. Wed. Morning Finspiration Report.

 Positive results overnight in the U.S.  Energy down - that's good for the U.S. market.  Gold down.

Dow Jones +0.62%.  SP500 +0.73%.  Nasdaq +0.93%.  Small Caps +0.66%.  Banks -0.03%.

SP500

 SP500 has bounced nicely off the 200-Day MA and horizontal support.  That's a good start.  It needs a lot more work to prove its bullish credentials.

Commodities.

Commodities Index -1.09%.  Energy -1.94%.  Base Metals +1.33%.  Agriculture -0.09%.

After an hour of trading this morning, XJO is up nearly +0.4%.

Late news:  XJO has now plunged - as at 11.30 is down about -0.2%.  Inflation figures must have been bad for the markets - interest rates to rise?
 

24/10/23. Tuesday Evening Finspiration Report.

 ASX had a low volatility day today after three days of high volatility.  XJO up +0.19% but well off session's high of +0.5%.

Today was the narrowest range of the past four days and an inside day.  Notation for such an event is ID/NR4.  This is an infrequent pattern.  A break above or below from the high/low of today should involve an increase in volatility and provide short-term direction.   Click here for more on this pattern.

Given that the XJO is oversold and showing a positive divergence on the MACD Histogram, I would think that the most likely direction is up.

Six Sectors were up today.  Best was Materials (XMJ) +0.85%.

The five Sectors down today were:  Staples -1.02%, Utilities -0.51%, Health -0.29%, Property -0.23% and Communications -0.2%.  There's a bias in that group to Defensives.  So we had some switching today out of Risk Off into Risk On.  That's a positive sign.

Economic data out today showed a slowing in the economy.  Manufacturing PMI down from 48.7 in September to 48 in October.  Services PMI dropped from 51.8 in September to 47.6 in October.  Numbers above 50 indicate expansion.  Under 50 indicates contraction.  That's good news for interest rates (going down) but bad news for the economy.

In early Tuesday trading in Europe, stocks are down a little, STOXX600 -0.17%.  Dow Futures up +0.24%.  That's not necessarily a great guide to what will happen today as we've seen in the past.

It will be a busy night (Oz Time) for company reports in the U.S.  Some of the biggies coming Tues. are: Microsoft, Alphabet, Visa and Coca-Cola.  Those reports could be market moving.

24/10/23.

 Last night in America major indices finished mixed.  After the lunch session the major indices were all at least marginally higher, but afternoon trading sent Dow Jones and SP500 into negative territory while Nasdaq remained positive.

Sydney Futures finished in negative territory.

America Last Night.

 Dow Jones -0.59%.  SP500 -0.17%.  Nasdaq +0.27%.  Small Caps -0.95%.  Banks -0.95%.

SP500

 Last night's candle shows long wicks on top of a narrow body.  That's indicative of a major battle taking place between opposing forces (bulls and bears).  It is notable that the battle is taking place right at the 200-Day MA - usually taken as the dividing line between bull and bear market.

2-Day EMA of Force Index was low enough on Friday to suggesst a possible low (below bottom Bollinger Band).  It moved up last night.  It needs to get above both the 13-Day EMA and the centre line (20-DMA) of the Bollinger Bands to feel sure that a low is in place.

Commodities.

Commodities Index -0.64%.  Energy -1.74%.  Base Metals -0.11%.  Agriculture +0.05%.  Gold -0.34%.

After an hour of trading today XJO is up about +0.3%.
 

23/10/23. Monday Evening Finspiration Report.

 In my Weekend Report yesterday, I as relatively optimistic about the medium term outlook for the Australian market.  The ASX today was down again heavily and clearly finished below the 6900 support level, which is a bearish event.

So - have I changed my mind.  Not at this stage.  I'm getting more and more bullish non-confirmations of this bearish fall on a number of indicators that I keep.  Some of these are arcane, but do add further weight to the thesis that we're not far from a turn-around.  Tuesday is often called Turn-Around Tuesday by technical analysts.  We'll see tomorrow if Tuesday lives up to its nick-name.

Here's the chart for XJO today:

 The chart is clearly below the major support level of 6900 (round figures).  We still have that pesky positive divergence showing on the MACD Histogram which suggests we're not far off a bottom.

Here are a few more charts with positive divergences which suggest that the ASX is not far off a bottom.

Above is a chart for NewHighs/NewHighs+NewLows.

I put a fair degree of weight on this data set.  A positive divergence between the low of 6/10/23 and now is clear on the chart.  6/10/23 was the date of the major Hamas incursion into Israel.

Historical Volatility

Volatility is usually expected to rise during times of crisis.   Volatility acts inversely to the stock market. Yes, HI has risen but is still well below the height seen in early October, and nowhere near periods of bearish sentiment back in July and March.

 Bonds/Stocks 

In crisis periods we expect Bonds to outperform Stocks.  Bonds are considered a "safe haven" in times of crisis.  Below is the chart of the ratio of Bonds/Stocks.

 Since early October, Stocks have performed surprisingly well compared to Bonds.  The Ratio of Stocks/Bonds was deeply negative in early October - now it is slightly positive in favour of Stocks.  Curious.  

Health.

The big surprise in the market today was the good performance of the Health Sector which has been in the dog house for many months.  Today XHJ was the best performing Sector on the ASX, XHJ up +1.53%.  This might just be a turning point for Health for long-suffering investors in Health Care Stocks.  Still - we need to see a new up trend develop before getting too excited.  But a bullish engulfing pattern coming at the end of a long down trend is a good start.  And, we have a confirmed positive divergence on the MACD Histogram, i.e., the histogram is moving up from a higher low.

  Good luck

22/10/23. Weekly Finspiration Report.

 The past week was negative for the Australian stock market, with big falls occurring on Thursday and Friday/

XJO Weekly Chart.  

 

 XJO down this week, -2.13%, erasing the gain from the previous week. 

XJO had no trouble slicing through important support at 6957 and finished at the equally important support of 6900 (round figures).

XJO Daily Chart.

XJO held up reasonably well for the first three days of the week, but sliced through important support t 7000 (round numbers) on Thursday.  On Friday, it continued down through the next support at 6957 to finish at the next important support of 6900.

Positive divergence on the MACD Histogram suggests the next move will be to the upside.

SP500 Daily

 SP500 is showing a similar pattern to the XJO.   It is back down to an important support zone.   It is also opposite a high volume node which might provide support.  

MACD shows a positive divergence which suggests the next move will be to the upside.

SP500 was down -2.39% for the week.  That was an unusual negative result as the past week was Options Expiry Week which has a positive bias.

Sector Performances this week.

The only places to be this week were XEJ (Energy) +2.67% and XGD (Gold Miners) +6.1%.    Both were benefitting from a War premium due to the Hamas/Isreal Clash.

 

After Energy,  best performing sector (relatively) was Materials (XMJ) down -1.57%,  IT (Info. Tech) was down a whopping -5.07%.  IT over the long term has a good growth record, but short term can be volatile.  A great trading mechanism for savvy traders (as is Energy and Gold).

From the time of the initial incursion by Hamas into Israel early in October, XGD (Gold Miners) is up more than +15%.

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

• Above their 200-DMA:  last week 35%, this week 32%.
• Above their 50-DMA:  last week 32%, this week 21%
• Above their 10-DMA:  last week 72%, this week 19%.

The few times we've seen figures like those for ^10DMA were in early July '23, mid March '23 and late Sept. '22.

I've marked those times on a weekly chart of XJO below:

 The last three times we had an exceptionally low reading for Stocks ^10DMA. it has been followed by a tradable rally.

Conclusion.

 

The War in the Middle East has had a negative effect on stock markets, but Energy and Gold Miners have been beneficiaries.

 

Technical analysis suggests the next movement in stocks will be to the upside, but we're in a dangerous period with War in the Middle East.  So technical analysis might be thrown out the window.

 

November tends to be a positive month for stocks.

 

Finally, SPY (ETF for SP500) finished at  $420.58.  MAX PAIN for November Options Expiry for SPY is $450.  That's a hefty premium of +7%.

 

Good luck

 

 

21/10/23. Saturday Finspiration Report.

 Yesterday, ASX fell heavily again.

XJO down -1.16% yesterday.  It is now back down to the key horizontal support level of 6900.  If that fails, the next major horizontal support level is 6440. That would entail a further drop of about -6.5%.  From late July till now, XJO is down about -7.5%.

Between now the next major horizontal support level is the 200-Week MA at 6770, that could also provide a significant support level.  

Below is a weekly chart showing the next support levels.

Will the Index continue falling?  Possible.  

On the positive side, daily chart indicators are beginning to show upside potential.  Daily RSI is at 35.9 which is oversold (but not very oversold).  Indicators in the lower panels, show potential for positive divergences - but we have to wait and see how those play out.

Overnight.

U.S. Stock indices were weak.  Oil down and gold showed intra-day selling.

SP500 is down to horizontal support and close to its 200-Day MA.  That's dual support which may hold.

Like the XJO, SP500 is oversold with an RSI at 35.4 - almost line ball with the XJO RSI at 35.9.  So SP500 is not very oversold.

A big potential positive divergence exists on the MACD which could suggest a move to the upside.

Volume is rising but not enough to suggest yet that we are seeing a wash-out.

Force Index is falling to a low level - but, again, not enough to suggest a wash-out.

Indications from the chart is that a near-term double bottom low could be forming - but we need to see more information to fell sure about that. 

Commodities.

Commodities Index -0.75%.  Energy -0.65%.  Base Metals -0.28%.  Agriculture -0.23%.  Gold +0.27%.

Commodities may provide a better understanding of what might happen to stocks.  Commodities are traded by people - professional traders who often predict the future course of events than stocks.

Volumes for Energy have risen sharply in the past two days which suggest a looming down-turn.  Last night's candle on Gold is a big "shooting-star" coming at the top of the up-trend on high volume suggests the end of the spike in Gold.

Gold.

 Gold is a "safe-haven" in times of geo-political unrest as we've seen in the current turmoil in the Middle East.  Since 6 October, the time of Hamas incursions into Israel, Gold has risen nearly +9%.  Friday's intra-day selling may point to the end of the rise.  

Negative divergence on the 3-Day EMA of the Force Index suggests the next movement will be to the downside.   That would indicate optimism that the current geo-political turmoil is coming to an end.

Good luck.

 
 

20/10/23. Friday Morning Finspiration Report.

Stocks down, Energy up, Gold up.

 Fed Head Powell speech last night produced nothing new in the way of monetary policy but the stock market reacted in a volatile manner, down, then up, then down, down down.

The market was relatively docile before he spoke but after effects were negative.

Dow Jones -0.75%.  SP500 -0.85%.  Nasdaq -0.96%.  Small Caps -1.55%.  Banks -1.33%.

SP500.

Sp500 seems destined to retest the 200-Day MA.  If that fails, we may be looking at a bear market correction.  But let's cross that bridge if it happens.

Commodities.

 

Commodities Index.  +1.04%.  Energy +1.35%.  Base Metals +0.11%.  Agriculture +0.23%.  Gold +1.23%.

The Australian market is well down this morning - more than -1%.  Energy is the only sector on the positive side.