Is this as bad as it gets?
XJO Monthly Chart.
The monthly chart shows a sell signal for both the Supertrend (1.5/7) and the 8-Month EMA.
The monthly candle has bounced off major support - so it's possible the selling has ended, but unlikely.
Weekly Chart.
This week, XJO broke below the previous long-term support level which has held since September last year. It now becomes resistance. Such a long-term support/resistance level has a lot of strength and will be difficult for the XJO to break above. If it does - XJO is then back into its old long-term trading range - lots of sideways action can be expected if that happens.
So - XJO is now locked between two major support/resistance areas. The most likely scenario will be for the XJO to test resistance at 7168 and then fall again. XJO is currently at 6988.
Daily Chart.
XJO was down -2.62% this week.
Friday's action shows a bullish engulfing candle which is a strong short-term signal.
RSI(14) was at 23.6 on Thursday which is extremely over-sold, so a bounce to the upside was not unexpected. Plus, major support had held on Thursday. More short-term upside can be expected.
But serious resistance lies over-head: Supertrend(1.5/7), 10-Day SMA and major horizontal resistance.
It will take a lot of "oomph" to get past those and back into the old trading range. Not impossible - but difficult.
Sector changes this week.
All eleven sectors were down this week, with the best performer Consumer Staples (XSJ) only just on the negative side of the line. XSJ down -0.04%. XSJ is a strong defensive sector. Information Technology was again the worst performer, -4.6%, smashed by a fear of interest rate rises. The Gold Industry Group XDJ, part of the XMJ sector, was down a massive -14%.
Seven sectors were down more than -2%.
New Highs - New Lows Cumulative.
NH-NL Cumulative has broken decisively below its 10-Day Moving Average.
This is different from events back in Nov/Dec when breaks were marginal and NH-NL Cum went going sideways rather than falling.
This decisive break is another "sell" signal confirm the "sell" signal from the Monthly Chart (above).
Strong-Weak Stocks has also crossed decisively below its moving average signal line, confirming the signal from NH-NL Cum.
Stats for S-W stocks this week were: Strong Stocks 3, Weak Stocks 39. Net S-W = 36.
Because of the nature of the criteria I use to determine Strong and Weak Stocks, it is almost impossible for Weak Stocks to number more than 50, so a number of 39 Weak Stocks is a powerful indicator of just how weak our market has become.
As bad as it gets? Probably, for now.
Bonds versus Stocks.
On a relative basis Bonds are currently trouncing stocks as the above chart shows. That doesn't mean you wouldn't lose money in Bonds - just, you would lose money a lot less slowly in bonds than in stocks.
Another way of looking at it - an increase in allocations to bonds would slow the losses in your overall portfolio.
How bad is it?
A look at the number of stocks in the ASX100 above key moving averages provides an idea of how bad thins are.
ASX100 stocks above 10-Day MA: 6%.
ASX100 stocks above 50-Day MA: 20%.
ASX100 stocks above the 200-Day MA: 32%.
Short-term it couldn't get much worse. But in the long-term it could still get worse, in a Bear Market we would expect ASX100 stocks above the 200-Day MA to fall below 20%. We're not there yet - but maybe we're not in a Bear Market, yet.
Conclusion.
Expect a relief rally in the coming week. But, we are no longer in a "buy-the-dip" scenario. The odds have now switched to a "sell-the-rally" scenario.
Take care, and safe trading.
