Finspiration Australia

 

 Sunday, 21 May, Weekly Report. Australian Market.

The week started poorly but the past couple of days saw an improvement as a "miracle" in the American debt ceiling talks seemed probable.

XJO Daily.

XJO finished up a moderate +0.31% for the week but remains in a sideways consolidation movement.

Weekly Performance of Sectors (plus Gold Miners, XJO and Bonds)

Five sectors up, five sectors down and one flat.  Information Technology +5.19% continued its good work from the previous week when it was up +1.97%.  XEJ, which can be quite volatile, was up +1.6% after being flat the previous week. 

The main defensive sectors suffered again this week.  XHJ down -0.69%, XSJ -1.08%, Utilities -0.22%.  Investors seem to be positioned for a risk-on market with a move out of defensives. 

Morningstar classifies the sectors into three groups, 

• Cyclicals - XMJ, XDJ, XXJ, XPJ.  These have strong correlations to the business cycle.  
• Sensitive - XTJ, XEJ, XNJ, XIJ.  These have moderate correlations to the business cycle.
• Defensives - XHJ, XUJ, XSJ.  These tend to have low correlations to the business cycle.

The "Sensitive" group did well this week with three sectors up and one flat.  XIJ was the best performing sector, followed by XEJ, while XTJ was the fourth best performer.  So three out of the four best performers this week came from the Sensitive group  

Momentum

The following data is a medium term measure of momentum obtained by subtracting Weekly RSI from Daily RSI.

The only sectors with positive upside momentum are Property (XPJ), Energy (XEJ), Telecomms (XTJ) and Information Technology (XIJ). 

XIJ has continued its dominance this week.  The sector is getting a little long in the tooth - if you hold strong stocks in that sector -  good for you.  It's probably too late now for non-holders to go chasing those stocks (e.g. XRO, WTC).

Besides XIJ, the big improvers this week were Energy (XEJ) and Financials (XXJ).  Strong stocks in those sectors might be worth a look in the next week. 

SP500 Daily Chart.

SP500 had a strong week this week with hopes that a solution to the Debt Ceiling impasse was probable.  SP500 was up +1.65% this week with most of that coming on Wednesday and Thursday (NY time).

The Index is in an Upsloping Bearish Wedge.  In my experience, these have a high probability of breaking to the down-side.

Yesterday, in my Saturday blog, I mentioned that the current up-trend could be a "sucker rally" hasNYSE and Nasdaq breadth hasn't improved in the same way as the Index.

That adds to the probability that the upscoping wedge will break to the down-side.

Take care.  If a debt ceiling agreement is reached - it might be a case of "sell the fact".

Stocks/Bonda Ratio.

The Stocks/Bonds Ratio Chart has climbed above the zero line so Stocks are currently out-performing Bonds - risk-on.  But,  it is usually best to wait until the 5-Day MA breaks above the 21-Day MA before feeling comfortable about a medium term rally in stocks. 

Conclusion.

XJO remains in a sideways consolidation.  Investors appear to be positioning for a risk-on market, with cycling out of Defensives Sectors and into Sensitive Sectors, and, to a lesser extent, into Cyclical Sectors.

SP500 may be setting up for a move to the downside after a strong week after improving Debt Ceiling talks.  If SP500 does drop, we will probably follow and could break to the downside of the current consolidation.

Stay safe.

Finspiration Australia

       30/4/23.  Weekend Report -Week Ended 14/3523.

The Australian market eased back this week with the XJO down -0.29%.  In America, their market was strong.  Dow Jones up +0.86%.  SP500 +0.87%.  Nasdaq +1.88%.  Why?  Simple.  This past week saw some of the big American tech companies report (e.g. META, Amazon, Microsoft, Alphabet).  Their reports were received enthusiastically.  Australia, unlike America, doesn't have a big tech sector in its market, so we didn't follow the Americans to the upside.

OK - Let's get into it.

Long-Term View.  XJO Monthly Chart.

In April,XJO finished up +1.83%.  

The index finished above its 8-Month EMA.  Hull MA13 is bullish and Supertrend (10/1) is bullish.

RSI is above 50 - bullish.

DZ Stochastic is above its buy line, but turned down just a little.

Double MACD is trending sideways.

On Balance, the XJO finished bullish for the month.

Medium-Term View - XJO Weekly Chart.

                                            

XJO lost a little ground in the past two weeks (-0.48% and -0.29% after a strong second week (up +1.98%). 

RSI is its 20-Day MA - that's bullish.  DZ stochastic remains bullish but into its overbought zone.

The chart finished above its 8-Week EMA.  Hull MA13 remains bullish and Supertrend (10,1) is bullish.

Again, the only blemish on the chart is the Double MACD which hasn't had a positive cross-over.  It tends to lag bit.

Short-term View - XJO Daily Chart.

The short-term view turned bearish this week.  The index was under pressure the previous week when Hull MA13 turned down.  This week, the chart finished below its 8-Day EMA, Supertrend turned bearish and Hull MA13 remained bearish.  

RSI finished below its 20-Day MA and DZ Stochastic has given a sell signal.  Double MACD has had a bearish x-0ver and CCI has closed below its 8-Day EMA.

With both Weekly and Monthly charts both bullish - we are probably looking at a short-term pull-back in the ASX.  Wait to see if this turns bullish before re-entry.

Daily Chart with Standard Error Channel.

XJO shows at the bottom edge of the Standard Error Channel.  This is a statistical representation of normal distribution of an Index or Stock.  As XJO is at the lower edge - we can expect a move back up to the upside.  It won't necessarily happen - but the probability is high.

SP500 Daily

SP500 has turned bullish - and that will probably drag the XJO back into bullish territory.

Weekly Changes in Sectors.

This week, ups and downs in the sectors were fairly even with a slight lean to the bearish side.

Four sectors were clearly up,  Property +2.07%m Telecommunications Services +1.7%, Information Technology +1.07%, Industrials +0.42%.  Financials finished just marginally on the positive side, +0.02%.

Five sectors were clearly down.  Materials -1.68%,  Utilities -0.95%, Health -0.58%, Energy -0.48%.  Discretionary fell marginally on the negative side, -004%.

Financials make up 25.8% of the ASX, Materials make up 23.6%.  Almost half the ASX is made up of those two sectors.  Extreme weakness in one or the other means the ASX will fall.  That happened this week with Materials down -1.68% while Financials was flat.

Sector Momentum.

All three columns sloping up - bullish trend. XIJ, XTJ, XPJ, XNJ.

All three columns sloping down - bearish trend.  XMJ, XUJ.

Down then up - counter trend bullish rally.  XXJ, XEJ,

Up then down - counter trend bearish pull-back.  XDJ, XHJ, XSJ, Gold, Composite Bonds (IAF).

Daily over-bought Momentum shows up in Telecoms - so it may not pay to go chasing strong stocks in that sector (e.g., Telstra).

NewHighs-NewLows.

This is a long-term indicator, but a good guide for long-term investors.

NH-NL Cumulative is above all its MAs (5,10,21).  This is giving it a positive diversion from the ASX chart.  That's a positive development and suggests more upside in the XJO.

Stocks/Bonds Ratio.

The past two weeks have favoured bonds over stocks - the ratio chart is falling.  

A negative x-over of the 5-Day MA below the 21-Day MA is usually a good sign of a return to bear market conditions.  That hasn't happened yet - but could happen if bonds continue to be favoured over stocks.

% of Stocks above key moving averages.

1.  % of stocks above 10-Day Moving Average: Last Week 56%, This Week 46%.  

2.  % of stocks above 50-Day Moving Average, Last Week 65%, This Week 69%.  

3.  % of stocks above 200-Day Moving Average, Last Week 68%, This Week 61%.

4.  % of stocks above Hull MA13, Last week 43%, This Week 42%

We're seeing a mixed picture this week with long-term indicators remain in bullish territory while the shorter term indicators are in bearish territory.

The chart for stocks above the 200-Day MA has fallen back below its 5-Week MA but remains above its mid-line (50%).  That's in keeping with the pull-back we've seen so far this past couple of weeks.

Conclusion.

The past two weeks appear to be a pull-back in an on-going bullish market.  Watch for a resumption of the short-term upside trend this week.  No guarantees, but the probabilities lie to the upside.

     9/4/23.  Weekend Report - The Week That Was.  Week Ended 6/3523.

XJO Monthly Chart.

We've had only one week so far in April.  XJO is up, so far, +0.57% and remains within the range of the month of March.

The three Supertrend lines are showing a non-trending long term index, one Supertrend line above the chart and two Supertrend lines below the chart.  All three Suprertrend lines are horizontal - indicative of a sideways trend.

PPO is above 0 - that suggests a bullish trend.  It's been that way since Dec. 2020.

DZ Stochastic is above its buy line, but turned down - indecisive.

Schaff Trend Cycle is just below its "buy" line.  It wouldn't take much to turn that bullish.

This is only at the beginning of the month, so no decisions made on this chart.

XJO Weekly Chart.

                                            

The weekly chart shows the XJO in a counter-trend rally against the big fall from early February to late March.  We need to see all three Supertrend Lines to turn yellow to presume that we have a new upside trend.  

DZ Stochastic has turned up but hasn't crossed above its "buy" line.  Schaff Trend Cycle remains under  its "do not buy" line.

PPO is marginally above its zero line.  We need to see it turn up from there to be confident of a new bullish trend.  

XJO Daily Chart.

XJO was up +0.57% this week.

XJO was up eight days in a row until the negative day on Thursday. That's an unusually strong short-term rally, and it appears to be faltering with three narrow-range doji candlesticks in a row.  That's occurring at a support-resistance line at 7226.  XJO finished the week at 7219 - marginally below horizontal resistance.

That Horizontal Resistance Line also coincides with the 50% retracement of the fall from early Feb. to late March.  Reversal of trends often occur at the 50% level.

DZ Stochastic has turned down but remains above its "sell" line.  Schaff Trend Cycle also remains above its "sell" line.  PPO is marginally above its zero line.

All that suggests that the coming week could be crucial to the future of the XJO.  

Weekly Changes in Sectors.

XMJ (Materials) was the dog in the major this week.  (Not quite an appropriate metaphor in the Easter Week).

XMJ was the only negative sector - down -2,72%,

Defensive Sectors were fairly strong this week:  XHJ +3.83%, XSJ +1.78%, XUJ + 1.78%, XTJ +1.68%.  

That suggests we've seen a rotation into defense against the usually strong XMJ.  It should be kept in mind that XMJ was up +7.01% in the previous week.  So it's not surprising that it had a fall this week.

Sector Momentum.

All three columns sloping up - bullish trend.  XDJ, XIJ, XTJ, XHJ, XSJ, XNJ, XGD, IAF.

All three columns sloping down - bearish trend.  XMJ, XPJ

Down then up - counter trend bullish rally.  XXJ, XEJ, XUJ.

Up then down - counter trend bearish rally.  No sectors.

Some sectors were affected this week, XHJ moved into the bullish section.  Materials moved from "bullish counter trend rally" to "bearish".  Again - this emphasises the shift into defense from offence.

Gold Miners and Composite Bonds (IAF) are bullish - both of those tend to be safe havens.

XJO remains in a "counter trend rally"

NewHighs-NewLows.

This is a long-term indicator, but a good guide for long-term investors.

NH-NL Cumulative started falling on 9 Feb.  This week it moved back above its 10-Day MA.   That's a promising sign for long-term investors.

Stocks/Bonds Ratio.

The recent strong 8-Day bullish rally took the Stocks/Bonds Ratio into an upside movement.

Then, the past couple of days has seen it equivocate.  It nudged above the zero line, then fell back below the zero line.  The zero line is the demarcation between medium tern bullish and bearish.

Historical and Implied Volatility.

When Historical Volatility falls below Implied Volatility - the market is usually in a short-term bullish trend.  (HV is based on historical data of the XJO.  Implied Volatility is based on data from the VIX Index.)

When HV gets down to around the 5 level, a reversal in the XJO trend usually occurs.  HV is not far off that level.

(This is often a leading or co-incident indicator.)

% of Stocks above key moving averages.

1.  % of stocks above 10-Day Moving Average: Last Week 77%, This Week 77%.  

2.  % of stocks above 50-Day Moving Average, Last Week 40%, This Week 51%.  

3.  % of stocks above 200-Day Moving Average, Last Week 50%, This Week 60%.

Stocks above the 10-Day MA has stalled this week at 77%.  Medium term and long term the market improved.

Conclusion.

 

XJO has had a strong counter-trend rally but appears to be stalling at Horizontal Resistance.

I've outlined plenty of pluses and minuses, and maybes about the market this week.  Nothing convincing one way or the other.

The coming week may be crucial for the near-term future of the XJO.

XJO resumes trading on Tuesday.  America will resume on Monday so that could provide an indication of where our market will go.

Addendum.

Asian markets, which were not closed on Friday, were up, Japan +0.17%.  Korea +1.27%, Hong Kong +0.28%, Shanghai +0.45%.

In America on Friday, Non-Farm payrolls indicated a slowing in employment.  CNBC commented: 

Nonfarm payrolls growth in March was about in line with expectations, but showed signs that the jobs picture is in the early stages of a slowdown.

That might give the American market hope for a slowing or pause in Federal Reserve interest rate rises and a boost to stock markets.

U.S. Futures were mildly positive on Friday.  Dow Jones +0.19%, SP500 +0.23%, Nasdaq +0.1%.

That's all relatively positive for America on Monday night - but anything can happen.  Wait for Tuesday morning.

Finspiration Australia.

     26/2/23.  Weekend Report - The Week That Was.  Week Ended 24/2/23.

XJO Monthly Chart.

After almost four weeks, XJO down so far -2.27% after stalling at the top of the strong January candle.  XJO has also reached a zone where it has failed in the past.

So far, the Index is above the 8-MEMA, Hull MA13, 50-MMA, 200MMA, Supertrend (7/1.5).  Not much damage done yet.

  

Monthly RSI is at 54.68.  50 represents the dividing line between bullish and bearish.

XJO Weekly Chart.

                                            

XJO remains in an up-trend, with higher highs and higher lows.  In the past five days, XJO fallen -0.54%.

XJO began to fall three weeks ago at a major resistance level.  

8-Week EMA and Hull MA13 turned turned down, which is bearish. Supertrend is providing support at this moment.  Events overnight in America could see a break to the downside of Supertrend.

Weekly RSI is at 55.2 - bullish but falling.  

CCI remains above its zero line (but falling).  It's been above its zero line since 24 Oct. 2022.  That marked the start of this bull market.

XJO Daily Chart.

XJO was in a strong up-trend in January.  It is currently in a short-term down-trend.

Daily RSI has fallen below its mid-line of 50.  That's bearish

XJO may be finding support at the 50-Day MA.   As stated previously, events on Friday in America could see a decisive break below that support level.

Weekly Changes in Sectors.

Despite the fall in the XJO this week of -0.54%, breadth was quite healthy.  Only two sectors fell this week, XMJ (Materials) -2.96% and XDJ (Discretionary) -1.23%.  XSJ (Staples) was flat, +0.09%

A couple of sectors showed quite healthy gains, XUJ (Utilities) +6.05% and XPJ (Property) also +6.05%.

The damage to the XJO was mainly done by XMJ (Materials) after both BHP and RIO presented gloomy reports to the market.  That's largely a result of events in China, where the country was in lock-down for the second half of 2022 - the time covered by the reports from BHP and Rio.  (The biggest markets for those two countries are in China.)

Monthly, Weekly and Daily RSIs. - Sectors + XJO + Gold + Composite Bonds.

This week's chart:

Each sector has three bars representing the RSI on Monthly, Weekly and Daily bases.

The following is a rough guide to interpreting the chart.

Bullish:  Rising bars.

Bearish:  Falling bars.

Counter trend rally:  Falling then rising.

Pull-back:  Rising then falling.

Bullish Sectors: XIJ, XNJ.

Bearish Sectors:  XXJ, XMJ, XEJ.

Counter trend Rally:  XUJ, XPJ.

Pull-back:  XDJ, XTJ, XHJ, XSJ.

XJO is in pull-back mode.  Composite Bonds (IAF) and Gold (XGD) are also in pull-back mode.

NewHighs-NewLows.

This is a long-term indicator, but a good guide for long-term investors.

NH-NL have been pulling back since the end of January.  That's a warning sign to long-term investors to stay defensive,

Stocks v Bonds.  Relative performance.

On a relative basis, Bonds are currently outperforming Stocks, i.e., the chart is below the zero level.

This is a reasonable picture of bullish and bearish status of the market.  It's probably a good idea to remain bearish on stocks while this chart remains below zero.

% of Stocks above key moving averages.

1.  % of stocks above 10-Day Moving Average: Last Week 42%, This Week 44%.  

2.  % of stocks above 50-Day Moving Average, Last Week 61%, This Week 56%.  

3.  % of stocks above 200-Day Moving Average, Last Week 70%, This Week 65%.

In the short-term, breadth, as measured by stocks above the 10-Day MA, improved a little this week as indicated by the Sector changes shown above.

The longer term measures remain above the 50% mark.  So the market is not in bad shape.

SP500.

I mentioned early in this report, the poor results in America on Friday.  Here's the SP500 chart.

SP500 began a steep decline six days ago and has fallen five of the past six days.  Friday saw a fall of >1%.  That could result in a follow-on fall in the XJO on Monday.

But a lot of strange things are happening in this chart.  Three of the candles show "hang-man" candles.  A small body at the top of the candle and a very long lower wick.  That indicates plenty of intra-day buying.

Although the bears have been dominant in the past six days, bulls have been fighting good rear-guard actions on three of the days, pushing back against the bulls.

The chart is now down to a crucial level.  It bounced strongly off the 200-Day MA on Friday despite the initial big fall.  Such action could spell the end of this push down by the bears.  We need to see a big upside candle on the SP500 on Monday to be confident that this fall is over - at least in the short-term.

It would be very interesting on Monday if the XJO pre-empts the SP500 by rising, or at least showing good strength in intra-day trading

 

Conclusion.

 

February has been a poor month for the XJO.  Although the past week showed a net loss for the XJO, internal strength wasn't nearly as pessimistic as suggested by the -0.54% fall in the XJO.

The long-term trend for the XJO is still bullish with higher highs and higher lows. 

Markets here and in the U.S. are now at a crucial stage.  Watch carefully for events on Monday.

Finspiration Australia. Chart Analysis for Australian and International Stock Markets.

Weekly Wrap, Week ended 14 October, 2022.  Is the Bear finished?

XJO Monthly Chart.

This chart is almost identical to the one shown last week.  XJO made a good start to the month, but this is only Week One of October.  Week Two has been flat.  The chart remains in a down trend.

XJO Weekly Chart.

 

This week's candle is a "dragonfly doji" - which means the XJO finished almost where it started after having a big dip down during the week.  XJO finished down just -0.06%, essentially flat.

This week's candle remains marginally above the 8-Week EMA.  One of the two Supertrend lines has switched from blue (bearish) to yellow (bullish).  That suggests the XJO is in non-trending mode.  Hull MA13 remains headed down.  This chart is more bearish than bullish. has run into the resistance of the other Supertrend lines.

XJO has, however, bounced off horizontal support - so it may be headed higher to again test the 50-Week MA as resistance.

XJO Daily Chart.

 XJO was down strongly on Monday, waffled around on Tue-Thur, then surged higher on Friday.  

The Index remains within the confines of the descending broadening wedge shown on the chart.  A break to the upside of that wedge would be bullish, but then it faces the resistance of the 200-Day MA.  As a general rule, it is best not to enter long-term positions while the chart is below the 200-Day MA.

This week saw the XJO test the 50% retracement of the previous rally, and then bounced.  That could be the start of another test of the oblique restraining line of the descending wedge.  A break above that should see the continuation of the counter trend rally

Action on Friday raises the possibility that Tue-Thur is a higher low.  We need to see a higher high to call this a bull rally, i.e., XJO must rise above 4 October.

SP500 Daily.

 This is a fascinating study in chart analysis.  From the high in August, the chart has made lower highs and lower lows - the definition of a down trend.  The lower highs have all occurred after counter-trend rallies up to the descending 20-Day MA.  Each time, the chart has declined to form a lower low.

Momentum is slowing as shown by the MACD Histogram.  It shows a positive divergence from the chart.  This suggests the possibility of a trend change.

Thursday saw one of the biggest reversal days on the SP500 for the past 50 years.  That produced a lot of euphoria - to be dampened by a big down day on Friday.  Volatility like this often occurs at the end of trends as the bulls/bears battle for supremacy.

It will mean down day on the XJO on Monday.

ASX Sector Results for this week.

 Three out of eleven sectors were up this week, two of those (Consumer Staples and Consumer Discretionary) were only up marginally.  XJO finished flat for the week, but it was largely the good performance of Financials (XXJ) which kept the XJO more or less on an even keel.  XXJ up +3.61%.   

Relative Strength of Sectors.

RSI (Relative Strength Index) is calculated using the default setting of 14 days - almost three weeks of trading.  It provides a more reliable guide to changes in sectors than the one-week results which can jerk around quite a lot and, thus, RSI is probably a more reliable guide to recent strength in the sectors. (Click here for a description of RSI.)

 Four sectors out of eleven are above 50:  Financials (XXJ), Materials (XMJ), Energy (XEJ) and Industrials (XNJ).  That's the same as the previous week.  Leadership has now shifted from Energy to Financials.  Energy and Materials were weak this week, but a return to the upside should lead to an improvement in the XJO as a whole.

NewHighs-NewLows Cumulative.

  

This is a metric for the long-term investor.  While NH-NL Cumulative remains below its 10-Day Moving Average, it is best for long term investors to remain cautious and defensive regarding the market.

% of Stocks above key moving averages.

1.  % of stocks above 10-Day Moving Average: Last Week 76%, This Week 54%.  

2.  % of stocks above 50-Day Moving Average, Last Week 26%, This Week 27%.  This remains bearish.

3.  % of stocks above 200-Day Moving Average, Last Week 21%, This Week 29%.  That's an improvement but still bearish.

The long term metric (% Stocks below 200-Day MA) remains very bearish but above its 5-Week MA.  That's promising. I'd like to see this above at least 40% before feeling comfortable.

Conclusion.

 

Overall, our market remains bearish, but we may be seeing a nascent counter-trend rally.

Remember that bear markets tend to reverse quickly.  Just because the market is bearish doesn't mean it can't change to the upside in the blink of an eye.  The stock market tends to be forward thinking - and can reverse when everything looks bleak.  While the Federal Reserve keeps chanting their mantra of higher rates, that is capturing the thinking of many investors.  Irristible forces in the stock market might have other ideas.

I'll leave you with the same thought I gave you last week.

Interestingly, the stock market in 2022 has generally followed the downward path typical for a midterm election year since 1962, according to Dan Clifton at Strategas. The S&P 500 is down slightly more than the typical 19% intra-year decline, but the news improves if stocks stick to the script. Stocks have historically bottomed in October and rallied by an average of almost 32% in the next twelve months. Clifton notes that stocks have been positive in the year after every midterm election since 1942!

Stay Safe.

  

Finspiration Australia. Chart Analysis for Australian and International Stock Markets.

5/10/22.  ASX up strongly today following good overnight results in America.

 XJO up today +1.74%, led by Information Technology +3.9% and Consumer Discretionary +2.7%.  Ten of eleven sectors were up.  Consumer Staples was down but only marginally, -0.04%.  Breadth was again strong, Advances/Declines = 884/494.

XJO is now close to the 50-Day MA and the upper restraining trend-line of an expanding wedge.  Tomorrow is likely to be up but those two resistances are likely to slow the market.