Weekly Wrap - Week ending 10 June, 2022.

XJO Monthly Chart.

XJO is only ten days into a new month (June).

The monthly chart remains range bound 6930-7539, but now at the lower edge of that range.  XJO finished Friday at 6932

The chart is  is essentially sideways as indicated by the two flat Supertrend lines, one above and one below the monthly candles.  

The MACD Histogram has fallen this week to the down-side, indicating that momentum is to the downside.

Weekly Chart.

XJO This week, XJO has its worst week since April, 2020, down -4.24%.  That broke a three week positive run.

The chart is range bound, in concert with the monthly chart, but clearly at the lower end of the range  

Medium term, the chart remains bearish..  Hull MA13 is blue (bearish); two Supertrend lines are blue (bearish) and the chart is just below the 8-Week EMA (bearish).  RSI and CCI are below their mid-lines (bearish). MACD Histogram is falling - momentum to the downside is increasing.

The chart is, however, rising from the lower edge of the range

Last week XJO finished at 7239, this week it finished at 6932.  

Daily Chart.

Both Supertrend Lines are bearish, Hull MA13 is bearish; Chart is below the 8-DEMA which is bearish.

On the bright side, there is a double positive divergence on the MACD histogram and the MACD itself.

That has a reasonably reliable leading indicator.  It suggests that the Chart will move up in the coming week.  

ASX is closed on Monday, 13 June for Queen's Birthday celebrations in the southern states.  So our market might escape the catastrophic fall in the U.S. on Friday if the U.S. bounces on Monday.

The ASX this week was knee-capped by a huge fall in Financials, down -9.01% after the Reserve Bank raised interest rates by more than expected +0.5%.

I'm a bit perplexed by the fall in the Financial Sector.  Rising interest rates are supposedly good for Banks as they can increase margins.  So the "big boys" who control the market must be assuming that economic activity will be so poor that will impinge on banks, and, possibly, they are expecting a large number of customers to fail in their loan repayments.

In yesterday's post, I looked at ANZ, one of the four big banks which dominate the Financial Sector.  That examination was hopeful of a rebound in ANZ, which would be reflected in the other three big banks.  So we may have seen the worst of the falls in Financials, at least in the short-term

SP500.

On Friday night, SP500 gapped down at the opening and continued falling to finish down -2.91%.

That move takes the SP500 down into a support zone from which it has bounced several times in the past.  After such a big fall, it is likely that SP500 will bounce again.

Sector Changes - past week.

This chart shows the performance of each sector (plus Gold Miners, XJO, BEAR and IAF) over the past week.  

Two sectors up, one flat and eight down. The best was Energy XEJ +4.97%, followed by Utilities XUJ +0.46%.  Energy fell heavily on Friday, down -1.64%.  It's run up might be coming to an end.

Financials (XXJ -9.01%) is the biggest sector in the market and a major drain on the performance of the XJO this week.  Not far behind is Real Estate XPJ -7.67%.  XPJ is an interest rate sensitive sector, so the big fall in XPJ is understandable.  The other sector highly sensitive to interest rate movements is Information Technology -4.81%.

New Highs - New Lows Cumulative.

This is one of the important breadth indicators.  Unless breadth is solidly positive, the market is always under threat.

NH-NL Cumulative continues to fall and is now well under its 10-Day Moving Average, that's a big red danger sign for long-term investors.  

ASX Advance-Decline Line.

This is another important indicator of breadth.

ASX Advance-Decline Line is also bearish, and in sync with NH-NL Cum.

 

% of Stocks above key moving averages.

1.  % of stocks above 10-Day Moving Average: Last Week 53%, This Week 17%.

2.  % of stocks above 50-Day Moving Average, Last Week 31%, This Week 18%.

3.  % of stocks above 200-Day Moving Average, Last Week 38%, This Week 29%

This is another indicator of weak breadth.  

Once these instruments fall below 20, that's a contrarian signal that the market might bounce.  Two out of three instruments are below 20.  It would be even stronger if the third one was below 20, but we are looking at a very weak oversold market, so the chance of a bounce is good.

I don't think there's any point in jumping the gun, if we're reaching an inflection point in the market, there'll be plenty of time to hop on a new trend.

Seasonally, we often see a medium term up-trend in stock markets.  I'd wait and see how this pans out.

Conclusion.

1.  Monthly, Weekly and Daily Charts are at the lower end of their ranges.   I could speculate that we'll bounce here, and there is some evidence for such a view, but jumping the gun could be dangerous move.

2.  Breadth is poor, so poor that contrarians will be salivating at the prospect of new buying coming into the market.  Contrarian signs are not always reliable, and sometimes well ahead of what could happen.  

3.  We need to see a move up on the Stochastic Daily chart.

4.  Double positive divergence on MACD and its Histogram point to the possibility of a move to the upside.

Finspiration Australia. Chart Analysis of Australian and International Stock Marke

   Weekly Wrap - Week ending 20 May, 2022.

XJO Monthly Chart.

After three weeks of May, the monthly chart is range bound 6970-7630.  

The chart is currently below the 8-month EMA but it is essentially sideways.  

We need about another week of data to see how the Monthly chart is travelling

Weekly Chart.

XJO was positive this week, +1%, breaking four weeks in a row to the downside.

The chart is range bound, in concert with the monthly chart.  Medium term, the chart the chart remains bearish..  Hull MA13 is blue (bearish); Supertrend (1.5/7) is blue (bearish) and the chart is below the 8-Week EMA is heading down (bearish).  RSI and CCI are below their mid-lines (bearish) and Stochastic has fallen below its signal line (bearish).

The chart is, however, at the lower end of the range so we'll probably see a move to the upside in the coming week.

The chart shows a trading range in round figures from 7630 to 6930.  This week XJO finished at 7075.  

Daily Chart.

In the short-term, this chart is looking positive.  Indicators in the lower panels have turned up; Hull MA13 and Supertrend (1.5/7) in the top chart are also bullish.

The chart has now formed a higher low, that's half-way to concluding a new up-trend.  We still need to see a higher high to complete the criteria for an up-trend.

The daily chart is, thus, out of sync with the weekly chart - that's typical in a range-bound market.

Sector Changes - past week.

This chart shows the performance of each sector (plus Gold Miners, XJO, BEAR and IAF) over the past week.  

Pluses and minuses for sectors were evenly spread with six sectors up and five sectors down.  Materials (XMJ +3.65%) had a return to form as did Information Technology (XIJ +5.04%).  

Consumer Staples (XSJ -3.45%) was the worst after a poor report from Woolworths (WOW -6.08%) and a big fall in URW -7.87% after a big sale of stock under market value.

New Highs - New Lows Cumulative.

NH-NL Cumulative continues to fall and is now well under its 10-Day Moving Average, that's a big red danger sign for long-term investors.  

ASX Advance-Decline Line.

Like NH-NL Cum, ASX Advance-Decline Line is also bearish, but not as bleak as NH-NL Cum.

It is nudging on its 5-Week Moving Average and another good week would take it over that metric.

% of Stocks above key moving averages.

1.  % of stocks above 10-Day Moving Average: Last Week 20%, This Week 74%.

2.  % of stocks above 50-Day Moving Average, Last Week 36%, This Week 38%.

3.  % of stocks above 200-Day Moving Average, Last Week 33%, This Week 40%

Two out of three are below 50% level - which confirms the bearish status of the ASX.  This week's bounce has resulted in a bounce in the shortest term metric.  That could be the start of a medium-term trend reversal.

Last week I noted:   This is the second week in a row where %Stocks above 10-DMA has been 20% or below.  That's another contrarian signal for a short-term bounce.  We got that bounce this week.

The above chart compares the performance of XSJ Consumer Staples (yellow and blue candles) with XDJ Consumer Discretionary (blue and grey candles).  

If consumers are confident about the economy, they are usually happy to splurge on big ticket, discretionary items - companies such as Harvey Norman, JB Hi-Fi and car retailers.  If consumers are not so confident about the economy, consumers tend to delay buying big ticket items.  

Conclusion.

1.  Weekly and daily charts out of sync - typical of a range-bound market.  Traders will play the ranges.

2..  Short to medium term is looking good for further upside.  We've probably seen a bottom in the medium-term.

I gave three beaten down stocks as tips last week ALL, REH, JHX.  

     ALL:  Buy at or above 33.06.  Stop Loss at 31.64.

     REH:  Buy at or above 16.00.  Stop Loss at 15.02.

     JHX:  Buy at or above 40.64.  Stop Loss at 39.06

ALL triggered a buy on Thursday when it hit 33.06.  It finished Friday at 35.17.  That's a gain of +6.4% so far.  Move stop up to break even at 33.06.  Continue to move the stop up if ALL continues rising.

REH triggered a buy stop on Monday at 16.00, but continued to fall the rest of the week.  Stop Loss still not triggered.  REH is currently sitting on a loss of -3.4%.

JHX didn't trigger a buy stop.  No trade.  Forget about JHX,

From the two trades, we're sitting on a gain of +3%.

Finspiration Australia. Chart Analysis of Australian and International Stock Markets

  Weekly Wrap - Week ending 13 May, 2022.

XJO Monthly Chart.

After two weeks of May, the monthly chart is in non-trending mode.  8-month EMA is trending down and this week, the XJO finished below the 8-MEMA.  Hull MA13 is trending up.  The Index is below the Supertrend (1.5/7).  Wait till the end of the month for clear long-term signal.

Weekly Chart.

XJO was negative this week, -1.81%, the fourth week down in a row.  

This chart is bearish.  Hull MA13 is blue (bearish); Supertrend (1.5/7) is blue (bearish) and the chart is below the 8-Week EMA which has turned down (bearish).  RSI and CCI are below their mid-lines (bearish) and Stochastic has fallen below its signal line (bearish).

That's a dreary outlook.

The chart shows a trading range in round figures from 7630 to 6930.  This week XJO finished at 7075.  

Daily Chart.

Friday was a serious up day for the XJO +1.93% .  It was a bullish engulfing candle, which coming at the low of a trend, is usually predictive of the end of the down-trend.

Thursday saw the Index at very oversold levels, with RSI below 30.  The Index duly delivered on Friday.

The short-term future of the XJO is looking positive.  XJO finished Friday at 7075.1  For a short-term trade, buy above 7077 with a stop loss at 7056.

Sector Changes - past week.

This chart shows the performance of each sector (plus Gold Miners, XJO, BEAR and IAF) over the past week.  

Health (XHJ +2.59%) sticks out like a sore thumb.  (Pardon the bad pun.). It was the only sector on the plus side.

Ten sectors were down.  Materials (XMJ -3.89%) was the worst.  Not long ago, XMJ was the mainstay of the XJO - not any longer.

XPJ (Property -2.55%) was hard hit again, but nothing like the previous week when it was down. -8.18%.  

Serious falls also occurred in the following sectors:  Information Technology -2.42%, and Industrials -2.22%

New Highs - New Lows Cumulative.

NH-NL Cumulative continues to fall and is now falling steeply under its 10-Day Moving Average, that's a big red danger sign for long-term investors.  

Below is a chart of % NH/NH+NL:

10-DMA of %NH/HN+NL is now the lowest it has been in the past 18 months.  As a contrarian indicator, that suggests we are near a low.

% of Stocks above key moving averages.

1.  % of stocks above 10-Day Moving Average, 20%.

2.  % of stocks above 50-Day Moving Average, 36%.

3.  % of stocks above 200-Day Moving Average, 33%.

All three are below 50% level - which confirms the bearish status of the ASX.

This is the second week in a row where %Stocks above 10-DMA has been 20% or below.

That's another contrarian signal for a short-term bounce.

Offence or Defence?

The above chart compares the performance of XSJ Consumer Staples (yellow and blue candles) with XDJ Consumer Discretionary (blue and grey candles).  

If consumers are confident about the economy, they are usually happy to splurge on big ticket, discretionary items - companies such as Harvey Norman, JB Hi-Fi and car retailers.  If consumers are not so confident about the economy, consumers tend to delay buying big ticket items.  

Consumer Staples are much more resilient to lack of confidence in the economy.  While they may delay purchasing a new refrigerator or Apple computer, consumers will still buy toilet paper and breakfast cereal.  In Australia, big retailers like Woolworths and Coles dominate the Consumer Staples market.

We can see in the above graph, that XDJ and XSJ were more or less in sync from May 2021 until February this year, when XSJ chart began to dominate the XDJ chart.  

That suggests that investors need to take on a more defensive posture than they had last year.

Note, however, the long lower tail on XDJ this past week.  The Index is attracting some buying power - so its fortunes may be change.

Conclusion.

1.  Weekly and daily charts are more or less in sync - bearish.  

2.  XSJ/XDJ suggests a defensive posture in investments.

3.  Contrarian indicators and support levels suggest the Australian market is at or close to a "bounce" level.  That will probably be a case of sell-the-rally. 

4.  Friday's good rebound may be a short-term game changer.  The intrepid can buy for a counter-trend rally.

Tips for the coming week.

Here are three beaten down stocks which, based on double divergences on MACD and MACD Histogram, are ready to make a rebound:  ALL, REH, JHX.  Do your own research on those stocks before buying.  You may have a different view.

ALL:  Buy at or above 33.06.  Stop Loss at 31.64.

REH:  Buy at or above 16.00.  Stop Loss at 15.02.

JHX:  Buy at or above 40.64.  Stop Loss at 39.06

Good Luck for the coming week.