Finspiration Australia. Weekly Wrap, week ended 4/2/22

  XJO has strengthened in the short-term.  Bearish conditions remain.

XJO Monthly Chart.

In January, the monthly chart showed a sell signal for both the Supertrend (1.5/7) and the 8-Month EMA.

Despite a good result in the first week of February, the XJO monthly chart remains below both the 8-Month EMA and the Supertrend.

Weekly Chart.

XJO up this week +1.89%.

XJO has  rebounded from a major support level set back in March, 2020.  

It now faces a major resistance level.  It remains below both the 8-Week MA and Supertrend (1.5/7).

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 7120.

Daily Chart.

In the short-term, XJO is doing well.  A strong week has taken the XJO back above its 8-Day EMA and given a buy signal by crossing above its Supertrend (1.5/7).

But, there are plenty of cautions lie in this chart.  Just overhead is a major resistance level.  Above that we have a "death cross", where the 50-Day MA has crossed below the 200-Day MA.

The "death cross" predicted major bear markets in 1929, 1938, 1974 and 2008.  It is not, however, always reliable.  A "death cross" occurred in March, 2020 - which failed as a predictor with the market rebounded strongly into a bull market which has only recently ended.  Take it for what it's worth - another warning sign.

We now have the short-term trend rising, with longer term trends still bearish.  The current short-term trend could be the start of something bigger, or it could be a counter-trend rally which will fail.  Still - time to be cautious about plunging money into this market.  More information about this further on in this report

Sector changes this week.

All eleven sectors were up this week, with the best performer Energy (XEJ +4.93%).  The increase in XEJ also dragged up Utilities (XUJ +4.4%).  The two worst performers (relatively) were Financials (XXJ +0.99%) and Consumer Staples (XSJ +0.97).

The market saw some interesting divergences in the four big banks, which usually perform more or less alike.  Westpac was up +4.31% after advising the market about some cost-cutting measures.  NAB was up +0.94%.  ANZ down -1.38%.  CBA down -1.64%.  WBC seems to be the place to be.

New Highs - New Lows Cumulative.

NH-NL Cumulative remains decisively below its 10-Day Moving Average.  Until it breaks back above its 10-Day MA, this indicator suggests that long-term investors remain defensive.

The bearish reading on the NH-NL Cum is confirmed by Strong-Weak Stocks Chart which moved up a little this week but remains below its 5-Week MA.   

Bonds versus Stocks.

The Stocks/Bonds Ratio chart moved up this week, but remains well below the zero line.  We need to see this ratio above zero to prefer stocks over bonds.  

This doesn't necessarily mean an either/or situation.  But does help in deciding allocations between stocks and bonds for long-term diversified investors.

Stocks above key moving averages - last week and this week

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:  Last week - 6%.  This week - 69%.

ASX100 stocks above 50-Day MA: Last week -  20%.  This week - 33%.

ASX100 stocks above the 200-Day MA: Last week - 32%.  This week - 40%.

Until we get all figures above the 50% mark, we'll assume that we are looking at a counter-trend rally

Conclusion.

We had a strong counter-trend rally this week.  It could be the start of something bigger but we need to see more evidence before concluding that we are back in bull market conditions.

Stay safe.  Good trading

Finspiration Australia

 Fri. a.m. 4/2/22.  U.S. Stocks break down from short-term trend.

Overnight.

Dow Jones -1.45%.  SP500 -2.44%.  Nasdaq -3.74%.  Small Caps -1.45%.  Banks -1.04%.

SP500.

This down-side move is an emphatic rejection of the recent short-term up-trend.

SP500 gapped down at the opening and continued to move lower.

The two-day candle-stick pattern is known as a "bearish kicker" pattern.  The first day is an upside move, followed by a gap down and further down-side.  This is a strong bearish signal.

Commodities.

Commodities Index +0.22%.  Energy +0.5%.  Base Metals -0.26%.  Gold showed intra-dy buying but finished lower -0.14%.

Iron Ore +4.2%.

The Australian market opened lower but then moved higher.  After 40 minutes of trading, XJO is up a little +0.14% The reversal to the upside has been led again by reports in America, with Amazon soaring after a good report announced after the U.S. market closed.

Finspiration Australia

 Thu. p.m. 3/2/22.  XJO falls modestly.

XJO printed an inside-day, narrow-range, indecisive candle today.

It started off negatively after U.S. Futures fell on poor reporting results from Facebook.  It recovered some of that intra-day, but generally, the market was going nowhere.

The big miners were the mainstay of our market today..  BHP up +3.1% and Rio up +2.4%.

Banks were a mixed bag with CBA down -1.4%, while WBC went the other way +2.3%.  It's unusual to see the big banks so out of sync.

Information Technology was again the worst performing sector -5.9%.  Health also did poorly -1.5%.

Tomorrow could be a crucial day for the XJO.  After an indecisive day today, if we get a big down day tomorrow, then we could be looking at a lot more downside.

Currently, European markets are ambiguous, with the UK flat, but Germany is showing a loss of about -0.4%.

Finspiration Australia.

 Thu. a.m. 3/2/22.  U.S. stocks up for fourth day in a row.

Overnight.

Dow Jones +0.63%.  SP500 +0.94%.  Nasdaq +0.5%.  Small Caps -0.51%.  Banks +0.4%.

SP500.

Short-term trend remains up.  Medium-term trend is undecided.

SP500 is now into the Ichimoku Cloud and below the 50-Day MA.  This puts it into the undecided zone.  Wait.

Commodities.

Commodities Index +0.4%.  Energy +1.03%.  Base Metals -0.17%.  Gold +0.36%.

No data for Iron Ore as China is on holidays.

After 50 minutes of trading this morning, XJO is down about -0.5%.

Meta (aka Facebook) reported after the market closed with disappointing results.  It fell more than 20%.  Futures in America fell, which explains the fall in the first hour of trading in Australia.

Finspiration Australia

 Wed. p.m. 2/2/22.  Another strong day for Australian stocks.

XJO Chart.

XJO is experiencing a counter-trend rally.  Longer term trends remain bearish.  Until a lot more upside occurs, we have to maintain that we are in a "sell-the-rally" scenario.

The big falls in January did a lot of technical damage to the market.  A counter-trend rally was not unexpected.  It could continue, but the odds are against it at this stage.

Tonight in the U.S. (Oz time) the ADP employment report is published.  This is a monthly report and closely followed for economic trends.  It always has the potential of being market moving if it throws up an unexpected number.

 

Finspiration Australia.

 Wed. a.m. 2/2/22.  U.S. stocks up again.

Overnight.

Dow Jones +0.78%.  SP500 +0.69%.  Nasdaq +0.75%.  Small Caps +0.75%.  Banks +2.39%.

SP500

After three days up, SP500 is now at its first serious resistance level, 20-Day MA and the lower edge of the Ichimoku Cloud.  Expect a pause here or a slowing in upside momentum.

Commodities.

Commodities Index +0.4%.  Energy +0.1%.  Base Metals +1.19% (bouncing off support of the 20-Day MA), Gold +0.08%.

Iron Ore - no change as China is shut for Chinese New Year holidays.

After 50 minutes of trading, XJO is up +0.9%.  VIX is up modestly, so we might see the XJO settle back now.

Finspiration Australia.

Tue. p.m. 1/2/22.  Australian RBA holds rates steady, but pulls away the monetary stimulus.

That's called two-bob each-way, in the old race-track parlance.

XJO today:

 XJO had a moderate rise today of +0.49%.  XJO remains below many overhead resistance.

Today's announcement by the RBA brought a flurry of short-term upside moves in the XJO at 2.30 p.m., but that soon evaporated about 3.00 p.m.

At the close, XJO is back close to where it was at 2.30 p.m.

Forget about the RBA announcement, the big mover in our market today was the Miners.  Materials (XMJ) was down -1.21%.  That put a damper on our market today.

International effects are much more important to the Australian market than anything the Federal Government or the RBA can do.