Finspiration Australia. XJO falls moderately

 XJO was down -0.51% in choppy trading.

Today's candle is an "inside day" which suggests indecision despite the negative finish.

The current three-day action looks like a bull flag.  So we could see some more upside here.

The Index continues to have longer term bearish signs.  The chart remains below the 50/200-Day MAs and below the Ichimoku Cloud.  If the XJO can break above those, we could see an explosive move to the upside.

I'm not expecting that as the bearish conditions suggest more downside.  But it is a scenario to consider.

Imagine, for instance, that Russia pulls back from Ukraine.  That could provide the impetus for a big move to the upside.

Finspiration Australia. New York market down in choppy trading.

 Overnight.

Dow Jones -0.49%.  SP500 -0.38%.  Nasdaq -0.00%.  Small Caps -0.35%.  Banks -1.02%.

Major indices show some intra-day trading.  PPO Histogram on the brink of going negative.  This can go either way.  Waiting on Ukraine?

SP500

SP500 is back below the 200-Day MA and into the consolidation zone formed in late January.

The index is below all three major Moving Averages- 20/50/200 but above the Supertrend (1.5/7).  This is fluffing about going nowhere in particular, but the overall picture remains bearish (below 200-DMA and Inchimoku Cloud).

Commodities.

Commodities Index +0.52% remains in its long-term up-trend.  Energy +0.95%.  Base Metals -0.13%.  Gold +0.54%.

Iron Ore -0.5%.

Overnight Oz Futures -0.9%.  

We should open lower today.

Finspiration Australia. XJO up modestly today.

 XJO up +0.37% today.

The XJO remains below the 50 and 200-Day MAs.  It is also below the Ichimoku "cloud".  These translate to bearish conditions, i.e., sell the rallies.

Although the XJO was up today, breadth was surprisingly weak.  NewHighs/NewLows = 24.32.  Advances/Declines = 504/1013.

European markets are currently very weak, German DAX -3% and U.K. FTSE -1.8%.

It's too early to tell, but the odds are suggesting a lower day for the XJO tomorrow.

Finsipiration Australia. Weekly Wrap, week ended 11/2/

   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.

After two weeks of February, the February XJO candle has risen above the 8-Month EMA but not above the Supertrend.  

If it can hold above the 8-MEMA, the XJO could be OK.  But we have two weeks left in the month.  Wait.

Weekly Chart.

XJO up this week +1.37%.  That takes it above the old resistance level.  It remains below both the 8-Week MA and Supertrend (1.5/7).  XJO is now back into its old long-term trading range - lots of sideways action can be expected if that happens.

A fall back below the old resistance level would be bearish.

Daily Chart.

On Friday, XJO failed at the 50 and 200 Day MAs which lie in close proximity.  50 below the 200 which produced a "death cross".  Failure at such important MAs is bearish.  Given event in the American market on Friday night (SP500 -1.9%) we can expect a flow-on to Australia on Monday.  That puts the current counter-trend rally under serious threat, and XJO is likely to fall back below major support.

Sector changes this week.

Four sectors were up this week, six down and one flat.  Despite the good overall performance of the XJO we have an unbalanced market.  The good result was largely due to good performances in Financials (XXJ +4.01%) and Materials (XMJ +3.29%).  Those are the two biggest sectors in the market making up together around 40% of the Australian market.  If those two perform well, we can expect the market generally to do well.  But the unbalanced nature of the sectors means that it only takes a bit of a knock to those two sectors to make the market have a hissy fit.

The good performance by the XXJ was due largely to re-ratings in the four big banks.  This week - ANZ +2.69%, CBA +4.73%, NAB +6.92%, Westpac +5.86%.

Health (XHJ -3.09%) and Consumer Staples (XSJ -2.33%) were the two weakest sectors.  They are both defensive sectors.  If the market continues to fall we might see a relative improvement in those two sectors.

New Highs - New Lows Cumulative.

NH-NL Cumulative jumped up this week to be level with its 10-Day Moving Average.  Further improvement would provide a long-term buy signal.  Given events in New York on Friday, that seems unlikely in the near-term.

A bearish reading on the Strong-Weak Stocks Chart remains.  I'd like to see these two charts in sync before giving a buy signal.

Bonds versus Stocks.

The Stocks/Bonds Ratio chart reached up to the zero line this week, but dropped again on Friday. 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 69%%.  This week 49%.

ASX100 stocks above 50-Day MA: Last week 33%.  This week 36%.

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

This week tested my resolve that the current rally was a counter-trend rally.  That resolve was confirmed on Friday when the XJO fell back from the 50 and 200 Day Moving Averages and back below the "death cross".

Friday's big fall in the U.S. suggests we'll see more downside in the near term.  I continue to think that we were in a counter-trend rally which has now failed.

Be prepared to take defensive action

Finspiration Australia. Friday - XJO stocks down, U.S. stocks down. U.S. Bonds up.

 Yesterday in Australia.

XJO down -0.98%.

The past two days represent an emphatic rejection of the 50-Day and 200-Day Moving Averages.  These two near neighbours on the chart are major markers of bearish trends.  The 50-Day below the 200-Day is called a "death cross".  It is not always a harbinger of a bear market as it is a lagging indicator, but, if the Index gets rejected after a test of that "death cross", it becomes a much stronger indicator.  Expect more downside. 

Last night in America.

Dow Jones -1.43%.  SP500 -1.9%.  Nasdaq -2.79%.  Small Caps -0.22%.  Banks -1.38%.

SP500.

SP500 is back below the 200-Day MA.  The Supertrend (1.4/7) has switched from yellow to blue, indicating further downside.  The index seems to be headed back down to major support around 4300.  SP500 finished last night at 4419.

Commodities.

Commodities Index +1.49%.  Energy +2.09%.  Base Metals -1.53%.  Gold +1.91%.

Flight to Safety.  Gold and Bonds.

Fear is beginning to grip the American markets.  With big falls in stock indices, we're starting to see money flow into safe havens, like Gold +1.91% (see above) and also Bonds.  20-Year Treasuries (TLT) were up +1.48%, the biggest move in TLT since last November, 2021.  We haven't seen moves like this during the recent fall in the SP500 earlier this year.

When fear grips the market, it becomes irrational.  Anything can happen.  It can also disappear quickly depending on geo-political and economic events.

At this stage, however, we can expect more downside in stocks, until the fear factors are assuaged.

Finspiration Australia. Increasing inflation data drops stocks in the U.S.

Overnight.

 Dow Jones -1.47%.  SP500 -1.81%.  Nasdaq -2.1%.  Small Caps -1.39%.  Banks -0.32%.

SP500.

SP500 drops back into its recent short-term consolidation area. Failed break-outs such as these usually continue to the downside.  

The chart remains locked between the 50-Day and 200-Day MA so the SP500 may be OK.

We now have a new trading range, 4450-4590.  4500 is the 200-Day MA.  

Commodities.

Commodities Index -0.52%.  Energy -0.41%.  Base Metals -0.66%.  Gold -0.38%.

Iron Ore +4,8%.

After 15 minutes of trading, XJO is down -0.5%.  The big iron ore miners are saving the market from a serious savaging.

Finspiration Australia. XJO up today but showing first signs of weakness.

 XJO finished up today, +0.28%.

XJO was confronted today by the 50-Day and 200-Day Moving Averages and failed to finish above either of those.  It marginally broke above the 200-Day MA (the higher of the two key MAs) then retreated back below the 50-Day MA.

Coming at the top of the trend, that's a sign of weakness.  We need to see downside tomorrow to confirm.

Seven out of eleven sectors were negative today and one finished flat.  So we have an unbalanced market.  The overall positive result was largely due to Financials (XXJ +0.9%) which is the largest sector in the market.  XXJ had another big bank reporting today, NAB up +4.5%.  But the reporting by the banks is now done.  They've been a big part of the current rally.  Without any more big results coming in from the banks - that's another reason for thinking the market might pause or pull back here.

Currently in Europe, both the DAX and FTSE are up a little, but that's a tenuous positive lead.

Let's see how tomorrow goes.