Weekly Wrap - Week ending 9 September, 2022.
XJO Monthly Chart.
We have only had a little over a week's action in the new month of September. The monthly chart does, however, let us see the long term picture for the XJO.
Both Supertrend Lines remain blue (bearish). The chart remains below the 8-Month EMA which is heading downward, i.e. bearish. Hull MA13 is headed down - bearish.
The XJO found support at the 50-Month EMA where it also found support back at the end of 2018. The chart seems likely to head down for another test of the 50-MEMA.
In the very very long-term, XJO found support after its bear market of 2020 at the 200-Month EMA. That looks like the support which might avoid a catastrophic fall for the XJO.
Weekly Chart.
XJO was up this week, +0.96%, but still a long way from erasing the previous week's big fall of -3.87%. The chart remains bearish.
XJO found resistance at the 50-Week MA. Two Supertrend lines have turned blue - bearish. Hull MA13 has turned down - bearish.
The Weekly Chart is in sync with the Monthly Chart - both Bearish.
Daily Chart.
XJO had a strong bullish reversal day on Thursday and we saw carry-through buying on Friday. That switched the two Supertrend Lines to yellow - bullish. Hull MA13 has turned up - bullish. Friday's action brought the XJO just above the 50-Day MA and 8-Day EMA. Expect more upside until we hit some other significant resistance. The next congestion zone is around 6980. After that is the 200-Day MA. The long term trend remains in doubt while the chart is under the 200-Day MA.
The Daily Chart is out of sync with the Weekly and Monthly Charts. That supports the view that we will see more upside in the short-term, but selling will probably put a stop to the rally sometime at significant resistance.
SP500 has had three days to the upside, our market has had two days to the upside. So our market will probably have a third day up on Monday.
Sector Strengths by RSI.
RSI (Relative Strength Index) is calculated using the default setting of 14 days - almost three weeks of trading. It provides a more reliable guide to changes in sectors than the one-week results which can jerk around quite a lot and, thus, RSI is probably a more reliable guide to recent strength in the sectors. (Click
here for a description of RSI.)
Seven of eleven sectors have readings below 50 - that is a sign of weak breadth.
The four sectors with RSIs above 50 are Energy (XEJ, RSI 50.63), Health (XHJ, RSI 55.1) Information Technology (XIJ, RSI 54,64) and Materials (XMJ, RSI 50.93). XMJ had a great week after recently under-performing, XMJ up this week, +5.13%. Financials (XXJ) was a significant drain on the market this week as that sector was down -0.88%.
1. New Highs - New Lows
This week New Highs average 16 on a daily basis. New Lows averaged 31.4. That's almost a ratio of 1:2 in favour of New Lows. Not a good look. Another bearish sign for our market. Until NHs can outpace NLs, long term investors should remain cautious.
2. Strong Stocks - Weak Stocks Cumulative.
This is a metric of my own making. All stocks on the ASX100 are rated on seven criteria. Stocks positive on all seven criteria are rated "Strong". All stocks negative on all seven criteria are rated "Weak".
This week we had 9 strong stocks and 10 weak stocks. That's more or less even pegging.
Cumulatively:
This chart remains below its Five-Week MA, which is a bearish reading. This is a reasonable guide for medium term traders.
% of Stocks above key moving averages.
1. % of stocks above 10-Day Moving Average: Last Week 21%, This Week 54%.
2. % of stocks above 50-Day Moving Average, Last Week 21%, This Week 41%.
3. % of stocks above 200-Day Moving Average, Last Week 31%, This Week 31%
Momentum on two metrics improved this week. But breadth in the long term remains bearish.
I'd like to see all of these above 50% to feel comfortable about the longer term bull market.
Conclusion.
1. Monthly and Weekly Charts are bearish, but the Daily Chart is out of sync - short-term bullish. Expect the current rally to be sold into.
2. Breadth hasn't been good. While Financials stay weak, there's not a lot of hope for a return to a bull market.
3. XHJ, XIJ, XMJ and XEJ have strongest momentum. Look to strong stocks in those sectors. Do your own research on stocks in those Sectors.
4. Historically, September is the worst month of the year, so any rebound will probably be sold into.
5. RBA interest rate announcement occurred on Tuesday. The market expectations were met, so the announcement didn't have a lot of effect, one way or the other.
Stay safe.
