XJO Monthly Chart
The long term chart of XJO has been range bound since Nov. 2022 - no trend.
So far in September, XJO has fallen -3.24%. It is now almost back down to the lower edge of the sideways channel.
There's no reason to expect that this sideways channel will collapse.
The sideways channel has persisted despite stready increases in interest rates by the Federal Reserve in America and the Reserve Bank in Australia.
In November 2022, the RBA's cash rate was at 2.85%. The RBA held rates steady in Sept. 2023 and is now at 4.1%. (The RBA began raising interest rates in May, 2022. Its cash rate has gone up 4% during that time.)
The ASX stock market has been resilient in the face of steady increases in rates.
Long term investors have been frustrated by the lack of movement in the XJO - but that is better than a full-blown bear market which many were expecting in the face of interest rate rises.
Generally, an inverse correlation exists between interest rates and stock markets. When interest rates go up, stock markets go down. So it has been a bit surprising that the Australian market has been resilient in the face of interest rate rises.
XJO Weekly Chart.
This week, the ASX fell heavily, down -2.89%.
The MACD Histogram in the bottom panel shows little sign of varying from the zero line, i.e., the Index remains range bound.
This type of market is best tackled by traders using "support and resistance" strategies.
The
stock market is always dynamic - one strategy will not suit all
conditions - but invariably - the market changes and another strategy
needs to be used. Some common types of trading strategies are:
support and resistance, mean reverting, trend trading, break-out
trading, momentum trading. It's not a case of one style for every type
of market.
Contingently, the current market is best suited to "support and resistance" strategies. Buy at a low support level and sell at a high resistance level. We saw a dramatic example this week.
XJO Daily Chart.
Friday was a dramatic day on the Ozzie market. It coincided with Options Settlement Day which always resutls in a big increase in volume. Not how wide is Friday's candle - an indication of heavy volume.
The market started with a confident break below the support zone shown on the chart, but wise heads so "No" and the market rose steadily all day to which above the support zone. I'd expect a test of that support zone before further upside which will need to overcome the next minor resistance level at the 24 August high.
Sector Performances this week.
All sectors were down this week. The best performer was Utilities -0.15% followed by Staples -1.53% and Discretionary -1.93%.
The worst performers were interest-rate sensitive sectors, spooked by a hawkish tone from the Federal Reserve despite on rise in interest rates. IT -4.78%, Health -4.48%and Property -4.44%.
Property has been trading within a range of about 1100 points or 7.5%. If things go according to Hoyle, we should see a move back to the upside from here.
100 Leader Stocks above their 200-Day, 50-Day and 10-Day Moving Averages.
- Above their 200-DMA: last week 45%, this week 37%.
- Above their 50-DMA: last week 46%, this week 25%
- Above their 10-DMA: last week 51%, this week 24%.
The Stocks above 50DMA are at 25% - we don't often see figures that low within a rebound coming soon.
The last time was in late June and early July.
SP500 - American Market.Here's the SP500 Chart:
On Friday, SP500 broke marginally below an importan horizontal support level. Expect a move back to th upside.
Conclusion.
The
Australian stock market has been range bound for many weeks. It broke below major support on Friday and then rebounded solidly. Expect more upside.
Be aware that there are no guarantees on the stock market. The old adage must be remembered: past performance is no guarantee of future performance.
If the market breaks decisively below support - then all bets are off.
