12/2/23. Weekend Report - The Week That Was. Week Ended 10/2/23.
This week has seen a dramatic change in investor sentiment. The previous week, the market was all gung-ho and seriously overbought. This week, investors sobered up and a pull-back has started.
XJO Monthly Chart.
We've only had ten days so far in February. XJO down so far -0.58% 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 10-MMA, Hull MA13, 50-MMA, 200MMA, Supertrend (7/1.5). Not much damage done yet.
Monthly RSI is at 56.57. 50 represents the dividing line between bullish and bearish.
XJO Weekly Chart.
The weekly chart shows a bearish engulfing candle. That's occurred at a major resistance zone.
Candlesticks are a graphic depiction of buying and selling in the market. A big dark engulfing candle shows the sellers were in complete control of trading this week.
8-Week EMA, Hull MA13 and Supertrend remain in bullish configurations, so not a lot of damage done yet.
Weekly RSI is at 60.58 - bullish but falling.
Stochastic was showing a negative divergence and has now turned down below its signal line.
XJO Daily Chart.
XJO was in a strong up-trend in January. That's all changed now.
Daily RSI is now at 53.71 - that's well below the weekly RSI of 60.58. A fall by the Daily RSI below the Weekly RSI is indicative of a pull-back. That's not something to trade from - but a filter to alert you to look at the charts and trade the charts.
Daily RSI remains above the bullish level of 50.
The indicator overlays on the chart (8-DEMA, Hull MA and Supertrend) all indicate the dramatic nature of the reversal that's occurred in the XJO.
STW Daily.
XJO can be a bit deceptive on a chart as it always opens at the same level as the previous day's close. Never any gaps on an XJO chart.
STW is a tracking ETF for the XJO and can often give clues as to investors' thinking not available from the index.
The above chart shows a big gap opening to the down-side on Friday and breaking below key indicators (8-DEMA, Hull MA and Supertrend). That's a key sign that a trend reversal has occurred.
Of course, the market always tries to play with the minds of investors. Looking at the right hand side of the chart, an investor might think that further downside is immediately probable. But looking at the left hand side of the chart shows a key support at 67.08. STW closed at 67.07 on Friday - so we might get some upside here before another move to the downside.
Monthly, Weekly and Daily RSIs. - Sectors + XJO + Gold + Composite Bonds.
In the week prior to this now, five sectors out of eleven were 70 RSI. Now there are none, with only one sector above 60 - XXJ - but it is also in pull-back mode.
Bullish sectors with RSIs arranged in ascending order are: XDJ, XIJ, XSJ. In the previous week, eight sectors were bullish. That's a big change in breadth.
Sectors in pull-back mode (Daily RSI falling below Weekly RSI) XXJ, XMJ, XEJ, XTJ, XHJ, XUJ, XPJ and XNJ. That's eight out of eleven sectors.
Gold (an industry group within XMJ) is in pull-back mode.
On the daily time-frame, we've switched from eight out of eleven bullish sectors, to eight out of eleven sectors in pull-back mode.
NewHighs-NewLows Cumulative.
NH-NL Cum is represented by the blue line. It is now marginally above the 10-DAY MA but remains well above the 21 and 34 Day Moving Averages. The Moving Averages are all aligned in bullish fashion from 10DMA at the top, then 21, then 31. This provides a buffer against pull-backs.
I've developed another long-term metric "StrongStocks-WeakStocks" which is similar to NH-NL but gives signals a little earlier than NH-NL SS-WS is up for the 13th week in a row and has moved well above its 5-Week MA. This week there were only 6 Strong Stocks compared to 34 the previous week. Weak stocks remained at four. While this remains above its 5-Week MA, long-term investors can remain calm.
% of Stocks above key moving averages.
1. % of stocks above 10-Day Moving Average: Last Week 67%, This Week 26%.
2. % of stocks above 50-Day Moving Average, Last Week 78%, This Week 61%.
3. % of stocks above 200-Day Moving Average, Last Week 76%, This Week 71%.
All metrics have pulled back, but only the shortest time-frame one is showing bearish tendencies. At this stage, we are seeing a pull-back and nothing more serious.
Stocks above 200-Day MA have fallen from 76% to 71% but remain above the 5-Week MA.
Conclusion.
Daily chart of XJO was in a strong uptrend. That has now reversed to the downside.
STW (ETF for XJO) suggests we could see some consolidation here or some upside in the near term.
Overall, however, investors' mind-set has now taken a turn for the worse. Expect more downside before this pull-back is over.
