Finspiration Australia

 

 Sunday, 21 May, Weekly Report. Australian Market.

The week started poorly but the past couple of days saw an improvement as a "miracle" in the American debt ceiling talks seemed probable.

XJO Daily.

XJO finished up a moderate +0.31% for the week but remains in a sideways consolidation movement.

Weekly Performance of Sectors (plus Gold Miners, XJO and Bonds)

Five sectors up, five sectors down and one flat.  Information Technology +5.19% continued its good work from the previous week when it was up +1.97%.  XEJ, which can be quite volatile, was up +1.6% after being flat the previous week. 

The main defensive sectors suffered again this week.  XHJ down -0.69%, XSJ -1.08%, Utilities -0.22%.  Investors seem to be positioned for a risk-on market with a move out of defensives. 

Morningstar classifies the sectors into three groups, 

• Cyclicals - XMJ, XDJ, XXJ, XPJ.  These have strong correlations to the business cycle.  
• Sensitive - XTJ, XEJ, XNJ, XIJ.  These have moderate correlations to the business cycle.
• Defensives - XHJ, XUJ, XSJ.  These tend to have low correlations to the business cycle.

The "Sensitive" group did well this week with three sectors up and one flat.  XIJ was the best performing sector, followed by XEJ, while XTJ was the fourth best performer.  So three out of the four best performers this week came from the Sensitive group  

Momentum

The following data is a medium term measure of momentum obtained by subtracting Weekly RSI from Daily RSI.

The only sectors with positive upside momentum are Property (XPJ), Energy (XEJ), Telecomms (XTJ) and Information Technology (XIJ). 

XIJ has continued its dominance this week.  The sector is getting a little long in the tooth - if you hold strong stocks in that sector -  good for you.  It's probably too late now for non-holders to go chasing those stocks (e.g. XRO, WTC).

Besides XIJ, the big improvers this week were Energy (XEJ) and Financials (XXJ).  Strong stocks in those sectors might be worth a look in the next week. 

SP500 Daily Chart.

SP500 had a strong week this week with hopes that a solution to the Debt Ceiling impasse was probable.  SP500 was up +1.65% this week with most of that coming on Wednesday and Thursday (NY time).

The Index is in an Upsloping Bearish Wedge.  In my experience, these have a high probability of breaking to the down-side.

Yesterday, in my Saturday blog, I mentioned that the current up-trend could be a "sucker rally" hasNYSE and Nasdaq breadth hasn't improved in the same way as the Index.

That adds to the probability that the upscoping wedge will break to the down-side.

Take care.  If a debt ceiling agreement is reached - it might be a case of "sell the fact".

Stocks/Bonda Ratio.

The Stocks/Bonds Ratio Chart has climbed above the zero line so Stocks are currently out-performing Bonds - risk-on.  But,  it is usually best to wait until the 5-Day MA breaks above the 21-Day MA before feeling comfortable about a medium term rally in stocks. 

Conclusion.

XJO remains in a sideways consolidation.  Investors appear to be positioning for a risk-on market, with cycling out of Defensives Sectors and into Sensitive Sectors, and, to a lesser extent, into Cyclical Sectors.

SP500 may be setting up for a move to the downside after a strong week after improving Debt Ceiling talks.  If SP500 does drop, we will probably follow and could break to the downside of the current consolidation.

Stay safe.

Finspiration Australia.

 20/5/23.  Saturday Morning Finspiration Report.

In Australia yesterday.

XJO up yesterday +0.59%.  The daily candle finished at horizontal resistance from 8 May.

Yesterday's candle finished marginally above the Base Line of the Ichimoku System.  (Base Line, black, is the mid-point of the last 26-periods.).

The Conversion Line remains below the Base Line.  (Conversion Line, blue, is the mid-point of the last nine periods.). We need to see the Conversion Line above the Base Line for a bullish context.

Overnight in America.

Dow Jones -0.33%.  SP500 -0.14%.  Nasdaq -0.24%.  Mid Caps -0.89%.  Small Caps -0.74%.  Regional Banks -1.76%.

Regional Banks came into focus again last night after U.S. Treasury Secretary, Janet Yellen, said more mergers might be necessary.

SP500.

SP500 is at the top edge of an upscoping bearish wedge.  Watch for a fall back to the lower edge of the wedge.  A break lower would be bearish.

Sucker Rally?

To check if the current upside move is a "sucker rally" I'm looking at the NYSE Advance-Decline Line.

Comparing the NYAD Line with the SP500 we can see that NYAD is showing a negative divergence from the SP500 - so - yes, this probably is a sucker rally.

Here's the chart for QQQ (ETF for Nasdaq).

Since early May, QQQ (Nasdaq) has been in a very strong up-trend.

Here's the Advance-Decline Line for Nasdaq:

NAAD is in a negative diversion from Nasdaq and at the lower end of its daily chart.  That's in marked contrast to Nasdaq which is now way up at the top of its chart - and overbought.

The only conclusion that can be drawn is that the market has been dragged up by a few large tech stocks.  That's a precarious position to be in for the market.

Gold.

Gold came roaring back to life last night, up +0.99% after being in a short-term down-trend since 10 May.  It still has work to do to prove its bullish credentials, but it does look promising.

Finspiration Australia.

 18/5/23.  Thursday Evening Finspiration Report.

Today, XJO erased yesterday's losses.

XJO up +0.52% today.  That's promising but not sufficient to turn the market bullish.

XJO needs to get above the Kijun Sen - that's the black line just above the current candle.  RSI also needs to get back above 50.

Europe in early trading is up, Euro STOXX600 up +0.48%, but it is playing catch-up after it fell last night while the U.S. rose.

Dow Jones Futures are up just a little +0.09%.

Finspiration Australia.

 18/5/23.  Thursday Morning Finspiration Report.

U.S. up strongly last night.

Dow Jones +1.24%.  SP500 +1.19%.  Nasdaq +1.28%.  Mid Caps +1.72%.  Small Caps +2.37%.  Banks +5.09%.

SP500

Last night's strong action seems to have resolved the recent impasse in the Index which has just been sliding sideways.

Tenkan Sen (Recovery Line - Blue) is back above the Kijun Sen (Base Line - Black).  That's a bullish signal.

Next seems seems to be horizontal resistance from May 1, at 4190.  SP500 finished at 3939 last night.

Commodities.

Commodities Index +1.19%.  Energy +3.01%.  Base Metals +1.7%.  Agriculture -0.76%.  Gold -0.35%.

Gold's doji candle-stick at the lower end of a down-trend suggests the down-trend could be ending.

Equities and Commodities will both help the Ozzie market today.

Finspiration Australia.

 17/5/23.  Wednesday Evening Finspiration Report.

The Australian market was weaker today with the XJO down -0.45%.

XJO has broken below the support of the top of the Kumo Cloud.

The short-term Hull MA13 has turned down,  Indicators in the lower panels have turned down.

Tenkan Sen (Conversion Line) is below the Kijun Sen (Base Line).  This is a bearish configuration.

The Index remains within the Kumo Cloud - which is a no trade zone.  This can still go either way.

Today's candle shows a long lower wick, so bulls were in the market today trying to push the index back up to the upside.

A break below the Kumo Cloud would be bearish.

Finspiration Australia.

17/5/23.  Wednesday Morning Finspiration Report.

U.S. falls overnight.  ASX to follow today.

Dow Jones -1.01%.  SP500 -0.64%.  Nasdaq -0.18%.  Mid Caps -1.43%.  Small Caps -1.28%.  Banks -1.45%,

Dow Jones fell below short-term support and below the 50-Day MA.

SP500

SP500 remains in its sideways consolidation.  

America appears to be waiting on a solution to the Debt Ceiling negotiations.

Commodities.

Commodities Index -1.09%.  Energy -0.77%.  Base Metals -1.35%.  Agriculture -0.71%.  Gold -1.25%.

Overnight action in Equities and Commodities is a negative for the Australian market today.

Finspiration Australia.

 16/5/23.  Tuesday Evening Finspiration Report.

For the sixth day in a row, XJO is sitting on the Kumo Cloud for support.

Patience.