Finspiration Australia. XJO may be on the cusp of a rebound.

XJO down today -0.51%.

 The long lower wick on today's candlestick indicates plenty of intra-day buying.  So we could be in for a bounce here.  Any upside movement is likely to be sold into as the Index is well below the 200-Day MA and the Ichimoku Cloud.

Best sectors today were, XSJ +0.36%, XTJ +0.22%, XPJ +1.45%.  That's not much encourgagement for the bulls as those three segments are all defensive segments.

We're likely to see a bit more upside, but - that should be a chance for longs to adjust their positions.

Finspiration Australia. Weekly Wrap, week ending 21/1/22.

      Ozzie market back to low of old trading range.

(Note:  Much of today's chart analysis uses terms from the Japanese Ichimoku trend following system.  If you are unfamiliar with Ichimoku, you can find good explanations here and here.)

XJO Monthly Chart:

XJO has had a great bullish trend since the end of the 2020 Covid bear market.  XJO topped in August, 2021 and has since stalled.  January has seen a test of the August, 2021 high and has now retreated.

On this monthly chart, XJO is below the Tenkan Sen - pale blue line. (mid-point of the past nine candles).  A close below the Tenkan Sen on the monthly chart is a sell signal.

At this stage, XJO is below the 8-Month Exponential Moving Average - confirmation of the sell signal

The index could, of course, close above those two indicators in the next week, negating the current sell signals.

XJO Weekly Chart:

On this weekly chart of the XJO, I've marked out the trading range for the Index which stretches  back to early September.  

The Santa Rally broke upwards from the trading range but has since failed and the XJO is now back to the lower edge of the trading range.  After such a wide range week, we may see a bounce here off support of the lower edge of the trading range.

The Tenkan Sen (mid-point of the past nine candles) has been sliding sideways - indicative of a non-trending market.

The weekly XJO Chart shows a fall this week of  -2.95%.  That's the biggest weekly fall in the past year.

A break through the bottom of the trading range would be bearish.  

Daily XJO chart:

The daily chart is bearish just about any way you look at it.  The index has closed well below the 200-Day MA and also well below the Ichimoku Cloud.  With those conditions, it would only be safe to take sell trades, not buy trades.  Tenkan Sen has closed below Kijun Sen - a sell signal.

Overhead Resistance comes in the form of a major horizontal resistance level and the Tenkan Sen (mid-point of the past nine candles).

The only if on this chart is major horizontal support where the daily candle finished on Friday.

We may get a bounce here, but that should provide longs an opportunity to sell out of this market.

Support comes from the 50-Day Moving Average and the oblique support line - the dashed black line on the chart.

One Week Sector Changes:

This week saw an unusual situation with all eleven sectors down.  (XGD, Gold Miners, is an industry group and part of the XMJ).

I've been warning for the past couple of weeks that the Australian market was unbalanced, mainly dependent on resources for any respectability.  XMJ was down this week -2.05%.  Energy has been on a tear for many weeks and has now succumbed to bearish sentiment.  It was only down a little -0.17%,

The two biggest losers were Information Technology (XIJ -4.41%) and Health (XHJ -4.35%).

The ten best performers in our market on Friday were either Bond ETFs or gold related stocks.  That tells a story about where the money is flowing.

NewHighs-NewLows Cumulative.

For long-term investors, this is one of the most important charts to watch.

The Cum NH-NL is now sitting just above its 10-Day Moving Average.  On Friday, NH-NL came in at -32.  That's the worst reading since late November 2021.  Cum NH-HL is now in danger of crossing over into a sell signal

The Strong-Weak Stocks Chart crossed decisively below its moving average this week.  It often gives signals a little ahead of the Cum NH-NL.

The stats for this week were:  Strong Stocks +2, Weak Stocks +24,  on balance ST-WS = -22.  

Strong Stocks have virtually disappeared from the picture.  (This only looks at the top 100 stocks on the ASX.)

Bonds versus Stocks.

Below zero - Bonds are preferred to stocks.

Conclusion: This week, the XJO finished at major support.  Important indicators have been broken to the downside (200-Day MA and Ichimoku Cloud).

Given the events on Friday in the U.S. our market will probably be down on Monday, breaking below that important support level.

That might give the big institutions an opportunity to trap eager bears and produce a bullish bounce.

Bears will curse, bulls will cheer.  It will probably be a chance for investors to adjust their holdings. They have a range of options:  reduce stocks, add to bonds, buy gold, buy the Bear ETF, go to cash.

Any interpretation of the stock market is probabilistic.  My view may prove correct - but watch the charts and see how it goes.

(The elephant in the room - Ukraine.  Anything could happen.  Probably bad.)

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.