Finspiration Australia. Objective analysis of the Australian and overseas stock markets.

 Sat. 22/1/22.  Down, down, prices are down

Yesterday in Australia.

Yesterday, XJO was down -2.27%.  Usually, a down day of >2% results in a bounce to the upside on the next day, not necessarily an end to the down-trend, but a relief from the downside pressure.  XJO is also at a major support level.

Yesterday also smelt like a capitulation day.  Breadth was woeful, 284 shares were up, 1278 shares were down, an Advance/Decline ratio of 0.18.  It's a long time since we've seen such a poor ratio in the Advance/Decline ratio.  Volume was also high, but not excessively so.  6.8 million shares were traded.  That's the highest since 8 Nov. last year.  That's not much of a guide as XJO printed a narrow range day close to the top of a short-term up-trend.   Today's action was a wide range day at the end of a short-term down-trend.

Money Flow Index on STW (a tracking ETF for the XJO Index) is showing a positive divergence from price, so STW may be close to a bottom.

Trying to predict a "bottom" when sentiment is so negative, is a recipe for failure.  We'll need to see evidence of a bottom before plunging into the prediction game.  But - hope springs eternal - we may be close.  Major reversal usually spring up out of nowhere.

Overnight.

Dow Jones -1.3%.  SP500 -1.89%.  Nasdaq -2.72%.  Small Caps -1.27%.  Banks -3.23%.

RSI(14) is below 30 on DJ, SPX, Nasdaq and Small Caps.  That's extremely oversold, so we are not far off a low.  But as the Guru on the Mountain maintains, oversold can become more oversold.

SP500.

SP500has broken below its 200-Day MA and is now at horizontal support.  RSI(14) is at 26.9 well below the 30 threshold for a reading of extremely oversold.  But, indicators are not yet showing signs of positive divergences, so there could be more downside yet.

We need to see signs of a low forming, before plunging into a prediction of an end to this downside trend.

Commodities.

Commodities aren't showing the same pessimism as stocks.  In fact, these four charts are all in medium-term up-trends, which suggests that the economy is OK.  (I might add - they do look like they're in the start of a pull-back.)

Commodities Index +0.09%.  Energy +0.38%.  Base Metals -1.29%.  Gold -0.33%.

US 10Yr T-Note.

Bonds and Treasuries have been blamed for much of the fall in stocks as investors worry about future rises predicted from the U.S. Federal Reserve.

Well, last night, 10-Year Treasures rebounded after showing some lovely positive divergences on some of the indicators.

Super Trend (1.5/7) has given a short-term buy signal for Treasuries.  Maybe stocks will take notice and also move to the upside.  That's the first positive sign we've had that a low could be forming for stocks.

Market Volatility.

Volatility Index is marching higher - it trends in the opposite direction to major stock indices.

It is now giving off "overbought" readings on RSI(14) and CCI.  We might need to see negative divergences on those indicators (as seen in Dec. 2021) before expecting a reversal.

Conclusion.

Stock markets are in strong down-trends.  Reversals can appear apparently out of nowhere.

We're not yet seeing strong evidence that a low has been reached, although some indices are at major support levels and Treasuries have kicked to the upside.  

Continue to wait until we have strong evidence that this down-side move has ended.

Finspiration Australia. Objective analysis of the Australian and overseas stock markets.

 Fri. 21/1/22.  America started positively, then imploded.

Overnight.

Dow Jones -0.89%.  SP500 -1.1%.  Nasdaq -1.3%.  Small caps-2.12%.  Banks -1.65%.

At noon, indices were well on the way to erasing all the losses of the previous day.  Then the slide began which accelerated in the last hour of trading sending the indices into bearish territory.

SP500.

SP500 is now in bearish territory below the Ichimoku Cloud.   Next stop - the 200-Day MA?

RSI is now oversold at 31.6.  Below 30 usually results in a rebound.

Wait.

Commodities.

Commodities Index -0.35%.  Energy -0.69%.  Base Metals continued to rise relentlessly +1.69%.  Gold -0.25%.

Iron Ore up again +2.6%.

After 25 minutes of trading today, XJO is down -1%.  

 Thu. p.m. 20/1/22.  Oz market defies fall in America.

XJO up today +0.14%.

XJO found support at the 200-Day MA and the top of the Ichimoku Cloud.

It was down early in trading, but intra-day buying took the Index back up into positive territory.

Despite the positive final result, our market was seriously skewed.  Only four sectors were up.

     Energy +0.8%

     Materials +3%

     Health +0.3%

     Utilities +0.5%

The positive result was clearly dependent on the resources.  Utilities tends to benefit from increases in the price of Energy.

Unless we see a return to favour for the XXJ (Financials), this market remains fragile.

Today's action was promising. 

Despite what you hear on the press, XJO often leads overseas markets.  Today's action might be a case in point.  Currently, both German and UK are showing solid if unspectacular gains.

I feel confident that the current pull-back is over.  But we need to see follow-through buying tomorrow.

Technically, that's a positive result.  We need to see upside buying tomorrow.

Finspiration Australia. Objective analysis of the Australian stock market and overseas markets.

 Thu. 20/1/22.  American market finishes well down.

Overnight.

Dow Jones -0.96%.  SP500 -0.97%.  Nasdaq -1.15%.  Small Caps -1.74%.  Banks -3.14%.

Most of these indices are approaching or are at support levels.  CCI on the Nasdaq is showing a positive divergence.  We could see a bounce to the upside in the next day or two.

SP500.

SP500 is close to multiple supports:  horizontal support from December lows, congestion zone back in late August and the bottom of the Ichimoku Cloud.  That's powerful support.  I'd expect that support to hold.

If it doesn't, then the SP500 will have formed a large head-n-shoulders formation which would probably lead to much lower levels.

Also on the plus side, the Index is well oversold with an RSI reading in the low 30's.

Commodities:

Commodities Index +0.55%.  Energy -0.63%.  Base Metals +0.96%.  Gold +1.59%.

The big jump in the Gold price is evidence of extreme fear entering the market.  That's not necessarily a bad thing.

Iron Ore +2.3%.

With Base Metals and Iron Ore both positive - that's a plus for our miners.

After 30 minutes of trading, XJO is down only -0.05%.  We could well end up positive today.

Finspiration Australia. Objective analysis of the Australian stock market and overseas markets.

 Wed. p.m. 19/1/22.  XJO breaks down through support.

XJO was down heavily today, -1%.

The index is almost back to the 200-Day MA.  It has found support at that level several times now since the beginning of December.  Everytime a support level gets tested, the weaker it becomes.

For now, after such a big down day, we can expect a bounce to the upside.

The spectre of higher interest rates continues to haunt the market.  Rarely can the Federal Reserve hike interest rates and create a soft landing.  Maybe this time is different?  Powell in his recent testimony said fighting inflation is the key focus of the Federal Reserve, which doesn't sound too much like a soft landing is a concern.

Breadth today was very poor.  Advances/Declines 554/949.  Ten sectors down, one sector up.

VIX hasn't climbed much despite the big drop in the index.  VIX readings for the past four days are:  13.66, 13.53, 13.64, 13.71.  Not a lot of change for this volatile index.

This is important, as VIX depends on a formula worked on the number of puts/calls being bought/sold.  If lots of puts are being sold (sending VIX higher, Market Makers (who sell the puts) have to hedge their books by selling stocks and futures, helping to drive the market lower. Market Makers (usually backed by big institutions such as banks) tend to control the market.  If the market drops heavily, and VIX doesn't move much, then the fall can be attributed to retail investors (the dumb money) and they are usually wrong.

So today's big drop could be a furphy.  We'll see.

European markets opened well on the negative side but are since rebounding fairly strongly.  Still too early to read anything into it, but promising.

See you all in the morning.

Finspiration Australia. Objective analysis of the Australian stock market and overseas markets.

Wed. a.m. 19/1/22.  Nasdaq breaks below 200 DMA.

Overnight: 

Dow Jones -1.51%.  SP500 -1.84%.  Nasdaq -2.6%.  Small Caps -2.63%.  Banks -2.4%.

Nasdaq.

Nasdaq has broken below its 300-Day Moving Average.  That's often taken as a sign of a bear market and the tech sector should be avoided until it is back above its 200-Day MA.

Using Ichimoku, I'd avoid the tech sector until the chart is above the "cloud".

Positive divergence on the CCI suggests we could see a rebound in the near future.

Commodities.

Commodities Index +0.78%.  Energy +1.31%.  Base Metals +0.4%.  Gold -0.17%.

Iron Ore +2.7%.

Overnight Oz Futures -0.9%.

To state the bleeding obvious - we'll open well down this morning.

Finspiration Australia. Objective analysis of the Australian stock market and overseas markets.

 Tue. p.m. 18/1/22.  XJO flat today.  Waiting for U.S. market to open.

XJO was down a little today -0.11%, essentially flat.

In the short-term, XJO remains within its tight sideways consolidation.

Such sideways consolidations usually suggest a continuation of the short-term trend.  After the big down-day on Thursday, 4 Jan, that suggests another move to the downside.

Most sectors recorded small changes one way or the other today.  Nothing much can be read into sector changes today.

Our market has basically gone to sleep over the past two days while the U.S. market is in-active.

We should see some more dramatic moves tomorrow.

Currently, European markets are negative.  Germany down about -1% and UK down -0.7%.  

The U.S. is always the wild card.  Europe can be down.  U.S. opens lower, and then rebounds.

Let's wait and see how this plays out.