Market Comments. 30/12/09

Today was one of those bleeeaaahhhhhh days. A day to go to the beach. But the weather here in Brisbane was hardly conducive to going to the beach. A bleeeeeaaaahhhhh day just like the market.

OK. A few facts.

The XAO today was down -9.7 points or -0.2%. Statistically insignificant.

Most sectors were also down a bit -0.1% to -0.4%. The exceptions were Utilities, -1.6% and Health -0.7%. Both Defensive sectors.

So the overbought sentiment is in the process of being worked off.

Another day of sideways-to-down should be in the offing - and then the market can decide what it wants to do - continue going up, or have a substantial correction.

That timing, of course, takes us through to the New Year. Traditionally that involves tax loss selling in America and downward pressure on the market.

So, the probabilities are for a lower market next week.

I'll do some more analysis after dinner - but I'm not expecting to come up with anything worth commenting on. So that's probably it for today.

Final thoughts for tonight. 29/12/09

(Click on above chart to see bigger version.)

I don't often comment on intra-day charts, it's not my thang.

But this one was too good to miss.

Looking at the XAO on the 10-day one-hour interval chart, the RSI was above 80 all day. That's a rare event.

A short term sell would be signalled with:

1. a drop of the RSI below 80
   
2. the Williams %R drops below -20
3. a break of the MACD below its signal line.

A further sell signal would be rung if the MACD remains below its signal line and:

1. Williams %R drops below its mid-line
2. RSI drops below its mid-line.

Good-night from your bearish commentator.

Remember - do your own research. I'm just a befuddled old grandfather.

Bed Time Stories. First Story. 29/12/09

O.K. Kiddies. Listen up. Here's the first of your bed time stories tonight.

You all listened to the news on the ABC and you heard how wonderful the stock market was today. Right? Right.

The market was up today. Right? Right.

And the ABC told you that the market was up on the back of strong banks and miners. Right? Right.

So - just go out and buy buy buy. Right? Wrong.

Let's just have a look at what did happen today.

The XAO was up 1.1%. Good.

The Materials Sector was up 1.1%. Good.

The Financial Sector was up 1.2%. Good. The Financials did better than the market. Good.

But what were the best performing sectors? Did I hear someone from the back of the class ask that question? What an intelligent child!

The best performing Sector was Consumer Staples. Up a whacking 1.6%.

The second best performing Sector was Telecommunications. Up a whacking 1.5%.

The third best performing Sector was Utilities. Up a goodly 1.3%.

hmmmmm.

Now, tell me kiddies, what do all these sectors have in common?

That's right, Little Johnnie, they're all Defensive Sectors.

Now Kiddies. What question are you going to ask Mum and Dad tonight?

That's right, Little Johnnie. You're going to ask Mum and Dad: Is it time to take some profit off the table?

Market Comments, 29.12/09

(Click on chart above to see bigger image.)

Just one simple observation to start today. The XAO closed outside the Bollinger Bands. The last two times this has happened, the XAO was down the next two days.

At the end of last week, I noted that the 50 Leaders were overbought. Given the close outside the Bollinger Bands and the overbought status of the 50 Leaders, the chances lie with a short term retracement.

I'll have more to say later tonight after I do some more indepth analysis.

(Click on the above chart to see a bigger version.)

This week, the Daily MACD broke above the Zero line and above its signal line. RSI and Williams %R are both above their midlines. RSI has broken above the 60 level which, in the past few months, has been a critical level demarcating up and down trends. A break above the current resistance level seems likely which means that a test of the bull rally high set in mid-October seems assured.

Conclusion: The XAO remains in its sideways consolidation but the RSI is suggesting further upward movement. Given the seasonal bias to the upside, a test of the mid-October high seems likely.

Additional Comments. 24/12/09

(Click on above chart to see enlarged version.)

As I suspected, the 50 Leaders are now registering a short term overbought reading. The percentage of stocks above the 10-Day SMA has now reached 92%.

The previous two time this has occurred (mid-October and mid-November) the market consolidated for a few days then dropped. We may see something similar.

However, given that the seasonalities are favourable, and the dollar can expect to rise, we may see a continuation of the market to test the bull rally high at around 4900 set on the XAO back in mid-October. If it does so, then I think we'll see a significant pull-back.

I'll have a more extensive summary of the week put up on the blog later in the long weekend.

In the meantime, I wish you all a wonderful and safe Christmas.

Lance

Market Comments, Christmas Eve, 2009

Well, for all those good little boys and girls who believe in Santa, he arrived this week on the Australian Stock Market, up for the week +2.42%.

The XAO is now at the top of its range and Indicators are bullish. MACD is above zero, and both the RSI and Williams %R are above their mid-lines.

At this stage I can't see any reason why this can't go higher. It's a seasonally positive time of year, and the Indicators above are not showing any negative divergences. So it looks like it will go higher.

I still have to do some further analysis, particularly on the 50 Leaders, which I suspect will indicate a short term overbought condition. But, that condition can stay overbought for some time under bullish conditions. However, that is jumping the gun. I'll look at that and post some additional material later today.

Further comments, 23/12/09

I've done a lot more number crunching since earlier this evening, and there's not a lot more to add.

The chart above shows that the market is getting close to overbought where we can expect a retracement. The number of stocks from the 50 Leaders above the 10-Day SMA has now reached 80%. That is usually the figure accepted as overbought, but in a bull market this commonly goes above 90% before a retracement occurs. So we might have to wait a day or two yet. Since we only have a half day trading tomorrow, with very light volume, it will probably be quite volatile so we could easily see a 90% figure tomorrow - then we're in the hands of the American market - open for two days before we open again.

What fun. :)

Wednesday Comments, 23/12/09

The market (XAO) remains range bound. It is still in No Man's Land between One Standard Deviation above and below the 50-Day Moving Average. There's all sorts of ways of determining a trend - but I think most of them would tell you that this is still going sideways.

It does look like the Santa Rally is with us - but until we break out of this range, I'd still remain on the side-lines. Look for:

1. A break above horizontal resistance,
2. A break above the 20-Day high.

Both are just above the current level.

Another sign would be a break above the 1SD line on the chart above.

There's a big move coming. The Put/Call Ratio on the American market is extremely overbought. That doesn't mean the market will tank. The call buyers might be right.

Last night in America, in the dying minutes of trade a big player put in a huge call option buy order, which pulled the put/call ratio down from about 9 to about 6. That's a big, big play.

Either he is very right or very wrong. So just on that piece of information alone, the market is worth watching.

Problem is - we're closed for two days after Xmas while America is open. The big move could come in that time period. hmmmmm. Time Zones - you gotta love 'em.

Not much more to say right now. I've been busy Xmas shopping today, so I haven't been able to do a lot of analysis.

I'll be doing some more later tonight - and should be able to post some more then.

Until then ............ enjoy your evening.

Update for Gold ETF, 22/12/09

Gold ETF remains within the confines of a well defined symmetrical triangle.

For a buy signal, look for:

1. A break above the down trend line
2. A break by the MACD above its signal line.

For a sell signal, look for:

1. A break below the up trend line
2. A break by the MACD below the Zero line.

Market Comments, Tues, 22/12/09

The market (XAO) had a strong move up today, +1.4%. We're now into the holiday period and volume has lightened off. Today was about half the 50-Day Average. Such light volume allows for greater volatility which we saw today.

The Advance/Decline Ratio was reasonable without being spectacular, 1.4/1. But UpVol/DownVol was a bearish 0.76/1. A bit odd. It's rare for the UpVol/DownVol to record a bearish number on such a strong day.

Just to add to the oddity, Small Ordinaries was up only 0.9%, while the 50 Leaders was up 1.5%. Again, strange to find risk aversion dominating on such a strong day.

I've been concerned that the Ozzie Dollar has had a trend change from up to down - but the market hasn't followed suit.

It would be normal now for the Ozzie, after a big drop like its had, to have something of a reaction rally up - and take the XAO up with it. So the XAO could break out to the upside if that happens.

I've been looking for evidence that the currency drop is having an effect. And I've found it in, at least, the Health Care Sector (see chart above). Health Care, dominated by CSL, Resmed and Sonic Health Care, is highly dependent on overseas earnings. So when the Ozzie drops, that improves returns to these companies when they repatriate earnings back to Australia.

We can see in the chart above that the Health Care/XAO Ratio has poked above the 65-Day Moving Average. The only time in this bull rally from March that it has been able to move significantly above the 65-Day MA was back in June/July when the general market was retreating. That is what would be expected. At that time the Ozzie Dollar was also in retreat. The market and the Ozzie were correlated. In such a case, Health Care has a negative correlation to the Ozzie, so that sector moved up in a counter trend move, while the market moved down.

Now, we have Health Care, as expected, moving up while the Ozzie moves down. Again - negatively correlated. But the general market hasn't acted as expected. Perhaps I'm wanting the relationship to be too close and it will happen. Or perhaps something else is operating that I'm not aware of.

Anyway - it would pay to be careful - and take advantage of an upside break-out if it occurs.

Somehow, I think in the medium term, the past relationships will assert themselves. Fundamentally, if the Ozzie is falling, money is being drawn out of Australia. This hurts liquidity and the volume of money available for investing in the stock market. So we should expect the market to fall with the fall in the Ozzie. Perhaps we should be patient and see how it pans out.

Putting it all together, the market was up strongly today - but, perversely, risk aversion was obvious. The Ozzie Dollar is weak which should affect the market adversely. So, I think the risks still lie to the downside rather than the upside.

Monday Update, 21/12/09

Apart from the fact that today the XAO suffered a big reversal - up by nearly forty points early in the day to finish down -12.4 or -0.3%, there's not a lot to say for today.

The market remains in the sideways to down consolidation where its been for about two months. Until we get a convincing break one way or the other, we're just getting "noise".

I don't mind waiting - for the longer we wait, the bigger the next move.

Materials and Financials are continuing to play tag - if one if up the other is down. No real direction there in the big movers.

The 50 Leaders and the Small Ordinaries are doing something similar. In a bull market, Small Ordinaries lead. In a bearish market, 50 Leaders do relatively better. But at the moment, there is no real direction coming from those two sub-sectors.

Two defensives were up - two were down. Telecoms were hit hard again today continuing the battering of Telstra.

The Advance/Decline Ratio was up a little. The UpVol/DownVol Ratio was down a little. Again - nothing to go by.

So, for now - it's wait and see time.

I wish I had something more positive to say - but patience is required.

Friday Morning Update. 17/12/09

Last night the Ozzie fell dramatically down over 1.5 cents.

It broke below the gentle downsloping channel I talked about last night. And it decisively broke below the 0.896 level. It has also broken below the 89-Day SMA. The only worse thing that could happen would be the 13-Day SMA to break below the 89DSMA. That now looks like a foregone conclusion.

The ozzie is cactus. Our stock market will also be cactus (just my humble opinion).

As Looney Tunes said: Th-th-th-that's All Folks.

Market Comments, Thurs., 17/12/09

Today the XAO was up 13.5 points, +0.3%. Trading was skewed by two main factors. Today was Options Expiry Day - and volume was way up. NAB was in a trading halt until late in the afternoon, and when it came on to the market NAB fell -4.65%. (NAB has made a bid for AXA's Australian and New Zealand Assets). This had flow on effects to the Financials Sector (XXJ down -0.7%) and because of NAB's large market capitalisation, it had a negative effect on the 20 Leaders and the 50 Leaders.

In many ways, the market today was quite bullish. The Advance/Decline Ratio was bullish with a reading of 1.32 and the Small Ordinaries were up +1.0%.

The market hasn't made much head-way in the past three days. It is now at significant horizontal resistance and the resistance of the 13-Day SMA and the 65-Day SMA. (See chart above.) If it can overcome that, the next major horizontal resistance is not far away. So I can't see much headway being made between now and Christmas. But - anything can happen.

I commented yesterday on the drop in the Australian Dollar. That drop was maintained overnight and weakened slightly today. The 13-Day SMA has crossed below the 34-Day SMA, and the chart line is now in a gentle downsloping channel (see top chart). A drop through the bottom of the channel would be very negative for the Ozzie Dollar and our stock market. While the Ozzie remains in that gentle downsloping channel, I can't see a big reaction on our stock market. But it needs careful watching. The change in the Ozzie seems like the beginning of a trend change - but I'd still like to see it drop through the 0.897 area before declaring a pessimistic outlook.

Market Comments, Wednesday, 16 Dec. 2009

The market barely moved today, down about 12 points on the XAO or about -0.25%. Despite the small move, considerable technical damage is starting to show up on the Moving Averages. The 13-Day SMA has now moved below the 65-Day SMA for the first time since this rally really got under way earlier in the year.

The Australian Dollar is starting to look weak. The chart line, as of this morning, had marginally broken support. Since this morning's call, the AUD has dropped from 0.907 to just 0.899 as of the time of writing. If this weakness continues overnight, the marginal break seen this morning will become significant.

For many weaks I've been saying that "it's all about the dollar". With the dollar weakening significantly, it is difficult to see how our stock market can remain bullish.
































Breadth continues to be weak. Since early November, the Advance/Decline Ratio is rarely able to get above the mid-line of the long term range while spiking down on occasions into the Extreme Low category.

Now. The chart of the XAO has not yet broken down out of its range. Until that happens, we can't make any firm conclusions. But, it looks like a matter of when, not if.

What about seasonality? Well, maybe this year Santa's not coming. So many people are waiting to make easy money from the Santa rally when (???) it comes - it just may be the case, that they will be disappointed. The market has a great ability to disappoint most of the people most of the time (if you'll pardon the alteration of a great historical quote).

Market Comments. Tuesday, 15/12/09

What do we make of today?

Simply .......... nothing.

A day of noise.

Up a bit at the beginning on the basis of overnight markets and then sideways.

The market remains range bound.

Until a clear direction becomes evident, it is best to stand aside.

XAO Chart, 14/12/09

The chart line barely moved today with the XAO up just +0.4%. It remains within the sideways-to-down counter trend move in existence since mid-October.

Today we say the 13-Day SMA cross below the 65-Day SMA. That is bearish; but while the market is rising (past two days) that negates the signal. A fall below Friday's low would be a sell signal.

Quick Comments, Monday, 14/12/09

First, from Quantifiable Edge, This week is options expiration. Over the last 25 years December options expiration week has been the most consistently positive week of the year for the SPX. . . . The bullish tendencies over the last 25 years have been exceptionally strong. . . . not only do you have strong indications that this upcoming week carries an upside edge, but also out as far as 3 weeks.

Today saw a big spike on the Australian market which started at about 3.20 and took the XAO up over 39 points from being down -22.6 points to being up +16.8 points. Extraordinary.

Most people put this jump down to a bail-out by Abu Dhabi of Dubai World.

American futures are currently up about 90 points.

OK - that's all the exciting stuff.

Let's get down to some figures.

Today was a low volume day, less than one billion shares traded, while the 50-Day Average is about 1.34 Billion. (And the 50 Day Average has been steadily dropping since August.) So, there's not a lot of conviction there.

The sector/sub-sector to benefit from action today based on volume was XXJ (Financials less Property Trusts) with a volume today 1.2 times its 20-Day Average. Despite this, XXJ ended flat on the day, up just 1.2 points at 5349.6. But from the low of the day to the close, the index jumped +1.26%. Quite a reversal.

The Advance/Decline Ratio today was bearish at 0.89.

The Small Ordinaries and 50 Leaders were level pegging, both up +0.4% in line with the XAO, up +0.4%

The Defensive Sectors were the best performers today: Consumer Staples +1.4%, Telecommunication +0.9%, Utilities +0.8%, and Health +0.6%. Health was equalled by Materials and Industrials; but generally the Defensives had the better of the day.

On balance of all those factors, despite the spike high late in the day, the general tone of the final results favour a bearish outlook.

Tomorrow may depend largely on whether the spike high on the Aussie market and the American futures is just an over-reaction to the Dubai events, or the start of something bigger. If American can sustain that burst during tonight's trading, then our market is probably a good medium term bet. We shall see.

I'll have some further comments later tonight when I do some more analysis.

Here's a chart that I call the SOS Index. It consists of "Six Outstanding Stocks": BHP, CSL, QBE, WBC, WOW, WPL. It is a small group of the bluest of blue chip stocks across a range of sectors (Materials, Energy, Banking, Insurance, Consumer Staples, Biotechnology). They have all shown good growth over the past 10 years.

If these stocks can't do well, the market is in trouble.

The above chart is a much cleaner picture of the state of the current market, which is a bit "messy".

This chart shows a distinct step down from the highs of September/October to November/December. The chart is currently testing the lower support level.

Even if the chart breaks higher, it is still only within the consolidation of September/October and must rise above that resistance to prove a new uptrend.

This is a simple device that takes a lot of the "noise" out of the market.

A break lower - and the market will probably head a lot lower.

A break higher - and the market is still facing considerable headwinds.

The market usually takes the line of least resistance.

We shall see. The seasonal factors favour an upsurge - but to do so, the market must overcome considerable overhead resistance.

Market Comments. Thurs. 10/12/09

I suggested yesterday that today might be an up day. Well, we were up early - but then it was all down hill. The XAO finished down -0.64%.

Nothing really dramatic happened. Today continued the slow grind lower of the previous four days. Unless the bears can get in a gut wrenching drop, this retracement is just that.

We've had five days down in a row. That's starting to get to the unusual stage.

However, from the longer term perspective - the long sideways consolidation is still in place.

Even if the market ekes out a gain tomorrow (highly likely after five days down) nothing has changed - we're still in a sideways consolidation. The short term players are having a ball playing these four/five day swings. But it is of no use to medium to long term investors.

Patience is required. A definitive direction will be determined soon. The longer the wait, the bigger the movement. Whether that will be up or down is unknown.

Market Comments, Wed., 09/12/09

The XAO finished down -0.7% today after being down -1.3% early in the day. A nice recovery without being a spectacular reversal day.

The Advance/Decline Ratio (middle chart above) nudged down almost to the Extreme Low today. As a contrarian sentiment indicator this suggests we may be up tomorrow. The fact that we did see some buying after the initial drop today lends support to the idea we may see an up day tomorrow. Today was also the fourth day down in a row. That followed four days up in a row. The bearish move hasn't been able to reclaim all of the previous bullish move - so the bulls have a slight win on that score.

On the other side of the coin. The Advance/Decline Line (bottom chart) has formed a small double top. This is a negative divergence from the Index which hasn't been able to break below the low of eight days ago. The Advance/Decline Line often leads the market lower.

Other technical indicators on the A/D Line need to be broken for a bearish confirmation (e.g., a break below the 65-Day SMA).

I'm expecting a more positive day tomorrow. What happens after that is another story.

Market Comments, Tuesday 08/12/09

The market was down -0.19%. Basically a sideways to down drift.

In the medium term the market has been trending sideways since September.

The most recent formation is an ascending triangle - which is essentially bullish.

These can, however, break either way. Until a clear break of the upper or lower support/resistance lines occur, its best to step aside.

The Advance/Decline Ratio was bearish today at 0.71.

The 50 Leaders (-0.1%) did better than the Small Ordinaries (-0.4%). This is bearish.

The Defensive stocks, however, did not do well. From this area of the market, Health was the worst performer (-1.0%). This reverses the action of these sectors from yesterday.

Also seeing a reverse today were the relative performances of Financials and Materials. Yesterday, Financials did better than Materials. Today, Materials did better than Financials.

This is just "Noise". Nothing can be read into today's market action.

The market remains in a sideways consolidation, with recent action leaning to the bullish side rather than the bearish side.

Daily Comments, Mon. 07/12/09

The All Ordinaries finished down -0.55% today.

Advance/Decline Ratio was a bearish 0.71. UpVolume/DownVolume was more bearish at 0.58.

The best performing sector was Health at 1.2%. The worst performer was Materials at -1.8%.

The recent good run for Materials seems to be over while the Financials are improving on a relative basis, down only -0.2%. Looks like its time to switch out of BHP and into CBA.

Gold Miners took a big hit, down -5%. Lihir Gold actually hit a 20 Day Low after hitting a 20 Day High only three days ago. Is the Gold Rush over? Still too early to say.

The XAO remains in No Man's Land between +1 Standard Deviation and -1 Standard Deviation above and below the 50-Day Simple Moving Average. Until the chart line can decisively break above +1 Standard Deviation above the 50DSMA, the XAO remains in Pull Back mode.

Gold Report, week ending 04/12/09

The top chart is a relative strength chart of Gold:XAO. (This is Gold in Ozzie Dollars – investable through the ETF Gold on the Australian Stock Exchange.) This week the ratio chart moved continues to hold above the 55-Day Moving Average. And the 55-Day MA has now turned upwards – a bullish sign. One only has to look at this chart to see the potential for further movement. Will it happen? I have no idea. I’m not in the prediction business – I just follow the trend. So long as the chart line remains above the 55-Day MA, the Gold.ETF is in a bull market.

GOLD in Australian Dollars appears to be a good hedge against the Australian stock market. It has a negative correlation to the XAO over a two year period of -0.9%. That is close to perfect over the medium term. It is as much a play in the Ozzie Dollar as it is in Gold itself. The Gold ETF can rise in Ozzie Dollars even while Gold, which is usually quoted in US$, may be reported as falling in the daily news media. Do not confuse Gold ETF with Gold reported in the news media. A fall in the Ozzie Dollar is negative for our stock market, but a strong positive influence on Gold in Ozzie Dollars

The best time to invest in Gold (through the ETF GOLD) appears to be when the ratio GOLD:XAO crosses above its 55-Day SMA (in orange on the chart). You can see throughout the bear market, the Ratio Chart line was above the orange SMA line. In late March, when the XAO turned bullish, the Ratio Chart Line fell below the orange SMA line.

The middle chart is the chart of GOLD (Gold ETF). It has been consolidating at the highs after a parabolic rise the previous week.

Gold was “overbought” with an RSI 86.9. This has now dropped back to 70.05 – still high, but the extreme overbought condition has been relieved.

The bottom chart shows that gold has now formed a small pennant. These normally break in the direction of the trend but can go with way. A break below the supporting line of the pennant would be an exit sign for short term investors. A break above resistance would be an “add” signal. Long term investors hedging against a drop in the broad Australian stock market might wait until the ratio chart breaks back below the 55-Day MA or, alternatively, wait for a break below the 150-Day Moving Average on the Gold-ETF chart.

The Gold ETF provides a simple and clear hedge against a fall in the general market.

Remember – Gold in US Dollars can fall but rise in Ozzie Dollars, and vice versa. Investing in Gold.ETF is as much a play on currency rates as it is on Gold itself.

Weekly Comments - Week Ending 04/12/09

IT’S ALL ABOUT THE DOLLAR

The Australian Dollar is in a sideways consolidation. The key support and resistance lines are shown on the chart below. The sideways consolidation has broken out of the rising wedge; but until horizontal support is broken, we must presume the trend remains up. So long as the Ozzie remains in an uptrend, this will support our stock market.


Corrections in the Australian stock market are marked by slowing momentum in the Ozzie Dollar. The market has returned to a bullish stance whenever the Ozzie has regained momentum. At the current time, the Ozzie has still not regained its upward momentum. Momentum is determined by the distance of the Ozzie Dollar from the 50-Day SMA. The following momentum chart clearly shows the relationship between momentum on the Ozzie and the Australian Stock market. The three major corrections which have occurred this year are clearly marked by loss of momentum in the Ozzie Dollar.

Until momentum returns to the upside, the Australian market will remain in a sideways-to-down correction.

Market Comments. Thursday, 3/12/09

After another choppy session today, the All Ordinaries finished up +0.3%.

No surprises were seen in the market details. The Advance/Decline Ratio was up modestly at 1.26. The Small Ordinaries did a little better than the Fifty Leaders, which is bullish. The worst performing Industry Sectors were the Defensives (Consumer Staples, Health, Telecommunications, Utilities) which were all marginally negative.

Gold Miners, however, finished on a negative note (down -0.3%) even though Gold has been setting new records. The Gold Miners often lead Gold, so Gold could be in for a consolidation or retracement after a stellar rise up to US$1223.

Looking at the chart above. We must presume we are starting on a new leg up in the bull market rally. The XAO has broken above the down trend line. The MACD is above both the Zero line and its signal line. Both the Williams %R and RSI are giving bullish readings.

We're now into one of the strongest months of the year (December and January are the two best). So this looks like the start of the Santa Rally.

Market Comments, Wed. 02/12/09

The market opened strongly today, the XAO was up over seventy points soon after the open.

It then drifted slowly lower all day to finish up 43.6 points or +0.9%.

There were no really obvious discontinuities internally in the market. The Materials Sector was the best performer, up +2.1%. The Telecommunications Sector was the second best performer, up +1.3%. The only sector down was Consumer Staples, down -0.1%, once again weighed down by a poor performance from Woolies.

The Advance/Decline Ratio was in line with the rise in the Index - 1.6. This is about what one would expect with a rise like today's.

We've now had three up days, and as can be seen from the above chart, the XAO is now at resistance. That's its first real test. A break above that would be bullish. The market has a habit of pulling back after three or four up days. So tomorrow could be crucial for the short term future of this market.

Also notice the DMI/ADX. The DMI + & - are twining together, and the ADX is below 15. This is indicative of a non-trending market. The MACD is confirming that - it is flat lining around the zero mark. Although the market has had its ups and downs it has basically gone nowhere for five weeks. A big move is coming shortly. A break upwards here would suggest further big moves up. A move lower would mean further sideways consolidation until the recent low is broken to the down side.

Let's see what tomorrow brings.

Market Comments. Tuesday, 01/12/09

Today's market was choppy with an eventual 0.4% rise in the All Ordinaries. At the end of the lunch session, the market was down and at precisely 2.00 p.m. it reversed direction and moved a total of about 30 points to finish the day up 17.6 points.

The biggest winner was the Industrials Sector up +1.0% followed by Telecommunications, +0.7%.
The only loser was Consumer Staples, -0.2% after the market decided to punish Wesfarmers, down -1.4%. The biggest winner in the blue chips was Lend Lease, up over nine per cent.

The Advance/Decline Ratio was slightly bearish at 0.98. That follows on from yesterday when the A/D Ratio, although positive, was not nearly as strong as the point gain would suggest.

The volume today was low, just over one billion shares traded in the XAO. The 50-Day Average is around 1.5 billion shares. That followed a low volume day yesterday of about 1 1/4 billion shares traded. I think that makes this two day rise somewhat suspect. But it has risen substantially in those two days.

It seems that the Australian market is following in the steps of the American conundrum, a rising share market on steadily declining volume.

I think we can expect further gains as this is the strongest part of the month in one of the strongest months of the year.

Monday Market Comments 30/11/09

On the surface, today was a strong day on the market, up +118 points on the XAO, +2.6%.

This was a fairly narrowly based move. The only Industry Sector to outperform the XAO was the Financials Sector, up +4.2%. The Advance/Decline Ratio was only 1.6. That's more like the ratio you would expect on a 40 0r 50 point up day.

Small Ordinaries was up only +1.2% while the Fifty Leaders was up +3.0%, and the 20 Leaders were up +3.2%.

The Financials Sector has recently been the worst performing sector in the market. While we must acknowlege the strength of today's move in the general market, much of the movement seems due to a short squeeze in the Financial Sector.

So - it was a strong day - but the strength must be looked at with a certain skepticism.

This was more like a 1.0-1.5% up day than a 2.6% day. After last Friday's big down day - an up day was expected. Let's see what follow through buying there is in the next couple of days before believing that this is returning to the long-term bull rally conditions.

Market Comments, week ending 27/11/09

The market is currently in a counter trend channel (see bottom chart) within the main uptrend channel which began in early March. That’s the dominant force in the market. Chances are that the market will resume the uptrend in the near future as the first half of each month recently has been strong. But – a break of the red-dotted channel line and a drop below 4515 would be very bearish.

The Bollinger Band chart (at top) provides another way of conceptualising the trend. The mid-line shown above is the 50-Day Simple Moving Average. Above and below are three lines each is One Standard Deviation further away from the mid-line. Since this bull rally began in early March, the XAO has spent most of its time above the +1 Standard Deviation Line. This is the Buy/Sell Line. Pull-backs are clearly shown dropping below that line, and the resumption of the trend has been signalled when the XAO climbed back above the +1 SD Line. Only once (before Friday), has the XAO fallen below the Sell Short Line, which is -1 Standard Deviation below the 50-Day SMA. That was not a decisive break and the XAO quickly recovered. It also dropped below the -1SD Line on Friday. If it recovers quickly, as it did in July, then the probability of the major uptrend reasserting itself is strong. If the XAO continues to drop below that line, then this market is in trouble.

Market Comments 26/11/09

Nothing much to say today. A small drop in the XAO kept the market in the sideways consolidation its been in for over two weeks.

With Thanksgiving in America, we're unlikely to see any dramatic news from there to change market direction.

Gold in Ozzie Dollars continues to power upwards. This is a concern for the wider market. It is unusual to find gold (in Ozzie) and our market also going up.

Other concerns are the Japanese market which has dipped into bear market territory. Also, the American 10-Year Bond Yield, after showing some strength, has adopted a bearish downward slant.

Although it has been widely reported that the American Dollar has plumbed new lows, our Dollar is still well below new highs. So don't be seduced into thinking that a very significant fall in the American Dollar translates into a positive for our market.

To sum up - our market as gauged by the XAO continues in a sideways consolidation. Until it breaks from that consolidation, patience is required.

Wednesday Comments, 25/11/09

Wednesday was a strange day. The market traded in a narrow range for most of the day. Then in the last half hour it broke upwards quite strongly to finish up +0.7% for the day.

Despite that there was a decided defensive feel to the final figures. The 50 Leaders were up +1.0% while the Small Caps were only up 0.1%. Telecom Sector, a defensive sector, was the best performer on the day, up 2.3%. Health also performed well, up +1.2%. The A/D Ratio was a slightly bearish at 0.98. But UpVol/DownVol was a reasonably bullish 1.65. Given the late surge and the numbers for the 50 Leaders, it looks like a lot of action was centred on a few of the large cap stocks.

The market is still within the consolidation range. So nothing has really changed today from the past few days. We're still waiting on the market to show us which way it is going to head.

Interestingly - volume returned to normal today (about 1.5Billion shares traded). Volume has been low for the previous four days. Again, I can't see that much can be read into that.

Late Night Edition

Nothing more to add to today's earlier comments.

Let the market do the talking.

Quick After Market Comment 24/11/09

Today's action had a lot of negative vibes. The UpVol/DownVol Ratio was a bearish .55.

The last three days show a white candle sandwiched between two black candles. This is usually bearish.

But ... until the market breaks one way or the other out of the current sideways consolidation, judgement needs to be withheld.

The volume for the past four days has been very light. This is indicative of the indecision the market is currently displaying. It's building up intensity for a strong move. Which way is the question. Although I have a bearish bias, we have to let the market show the way.

I may add to this blog later tonight after I do some more analysis. But I don't think any further evidence will sway my initial impressions of today's action.

Market Comments 23/11/09

The market remained in limbo today. Another inside day - modestly up at 0.7% So the market remains between the two key levels: 4820 and 4690. This is only a gap of 130 points.

The materials were up strongly at 1.7%. Financials were down -0.1%. Consumer discretionary was line ball with the XAO at 0.7% after Jerry Harvey gave a bullish account of pre-Xmas trading. Industrials were up reasonably at 1.2%. But the defensives were equal to or better than the broader market: Consumer Staples +1.0%, Health 0.7%, Telecommuniccations 0.8% and Utilities 1.0%.

It's very difficult to read anything of substance into those figures.

At the time of writing, American futures are up strongly at +86. Rarely do we see a down day when the futures are up that strongly even though there is some time to go before the American market opens.

The Ozzie Dollar was up about half a cent - and this supported our market.

Gold in US$ is currently at $1166 - up strongly from Friday.

Gold in AUD was up over 2.05% today. It's difficult to reconcile a rise in AUD-Gold and a rise in the XAO. Something has to give. This is against the "natural order" of asset markets.

We'll have to wait and see which way it turns.

Weekly Summary week ended 20/11/09

Market Summary

The general market was down slightly this week after being up Monday, then sideways for three days and then down on Friday. The XAO was down -0.34% on the week.

The XAO finished on a rising 13-Day Exponential Moving Average which may provide support. Only three S&P Industry Sectors were up for the week.

Best Three Sectors:
Materials: +2.72%
Consumer Staples: +1.37%
Utilities: +0.26%




Worst Three:
Financials: -2.33%
Industrials: -2.37%%
Information Technology: -4.39%

Among the sub-sectors: Property Trusts were down, -0.37%; Metals and Mining were up in line with Materials, +2.78%; and Small Ordinaries, -0.25%. The 50 Leaders under performed the XAO at -5.2% and performed less well than the Small Ordinaries. Risk Aversion/Risk Inclination was weighted to Risk Inclination on that measure. Gold Mining was up at +4.36%.

The market seems to be sending a message that all is not quite right with our local economy (financials and industrials down, defensives up) while the world economy (read China and India) is healthy providing support for our cyclical export oriented industries (Materials/Metals and Mining). Interpretations of the recent minutes of the Reserve Bank are suggesting that interest rates may not be raised in December. If the most hawkish central banker in the world (Glen Stevens) doesn’t move this December, then that may confirm concerns about the local economy and give weight to the Labor Government’s expressed intention to continue pumping the economy with stimulus money. Still – there’s a lot of ifs and buts in there. And perhaps we shouldn’t read too much into one week’s movement in the indices.

MARKET COMMENTS. 19/11/09

The market finished with a small gain today, the XAO up +0.2%. After being up early, the market sold off most of the day to finish with a short spurt which took it back into positive territory.

The day's trading lacked breadth. The Small Ordinaries was down -0.5%, while the 50 Leaders were up +0.4%. Only two of the ten Industry Sectors were up, and they were the two big ones, Financials, +0.6% and Materials, +0.4%. Financials have been oversold recently, so were due for a bounce.

Overall, the market lacked much conviction, but the bears still haven't overcome the bulls. This market is still in "indecision" mode. The market has basically been going sideways for eight days now, and today's trading represented an "inside" day. These are often followed by a range expansion day. So we could see a big move tomorrow which will determine the further short term direction of the market. We continue to wait for the market to show us the way.

Market Comments. 18/11/09

Another reversal down day on the XAO. That's three out of the past five days that we've had reversal down days. (See the long 'wicks' on the candles.) And they've occurred right at overhead resistance. The bears are trying to break this lower, but haven't succeeded yet.

MACD still hasn't risen above the zero line.

UpVol/DownVol was positive today at a mildly bullish 1.6.

Small Ordinaries were down -0.2% while the 50 Leaders were up +0.3%. So risk aversion was evident in the market.

I think today was a tie between the bulls and the bears. The current impasse will be broken soon. Just which direction - I haven't a clue. I'll let the market show the way.

Up - above 4817 on the XAO.

Down - below 4706.

Market Comments. 17/11/09

Despite the big move by the American market last night, the down movement I expected from yesterday's Australian action occurred today.

The switch out of Financials and into Materials continued with a vengeance today - but not enough to keep the market positive.

Apart from the Materials, the only sectors positive today were three defensive sectors: Consumer Staples, Health and Utilities.

Small Ordinaries(-0.3%) didn't fare as badly as the 50 Leaders (-0.6%). So some appetite for risk remains (as evidenced by the positive showing in Materials).

The five-day average of Advancing issues turned down today. The last time that happened was in mid-October which led into the big retreat finishing in early November. A turn down in this indicator is often (but not always) the beginning of a retreat.

Follow through selling tomorrow would be very bearish.

Market Comments. 16/11/09

A strange day today. Financials were down. Materials and Energy were up strongly.

The Advance/Decline Ratio was positive at 1.39. UpVolume/DownVolume Ratio was a very strong 4.96. Go figure. This means that a lot of volume was going into a relatively much smaller proportion of stocks.

The market is getting out of whack.

Combine that with fact that the Gold/XAO Ratio was a strong mover today, and you can see how out of kilter things have become.

The momentum from today's UpVol/DownVol Ratio will probably continue through to tomorrow. But things have to come back into equilibrium.

After another day or so, I'd expect the general market to fall.

It's All About The Dollar

For many weeks I’ve been saying: This market won’t start to drop until we see the Ozzie Dollar start to weaken. The Ozzie Dollar is now range trading between about 90 Cents and 93 Cents. A decisive break from the current range should see a similar move in the stock market. The following chart is a bit “messy”, but shows the major consolidations of the Ozzie, the Rising Wedge and Moving Averages. A decisive drop below 90 Cents would be bearish for the stock market.

Weekly Summary

Market Summary

The general market was up strongly early in the week to fade over the last two days. The XAO was up +2.57% on the week. Thursday saw a remarkable reversal day to the downside and this weakness carried through to Friday.

The XAO is above a rising 13-Day Exponential Moving Average. All ten SP Industry Sectors were up.

Best Three Sectors:
Information Technology: +6.26%
Materials: +4.04%
Consumer Discretionary: +3.61%


Worst Three:
Financials: 1.63%
Health: 1.52%%
Utilities: +1.51%%

Among the sub-sectors: Property Trusts up strongly, 4.24%; Metals and Mining, +4.09%; and Small Ordinaries, +3.53%. The 50 Leaders under performed the XAO at +2.3% and performed less well than the Small Ordinaries. Risk Aversion/Risk Inclination was weighted to Risk Inclination on that measure. Gold Mining was up at +2.4%.

Long Term Trend

The long-term trend is determined by the 13-Day SMA and the 150-Day SMA. It is currently positive.

CONCLUSION: LONG TERM INDICATORS ARE GIVING A “HOLD” SIGNAL.

Market Comments 12/11/09

Choppy reversal day today which didn't tell us much.

The daily candle was a "shooting star" which is theoretically bearish but not particularly reliable.

Advance/Decline Ratio was 1.13, mildly bullish. But the UpVolume/DownVolume was 0.82 - mildly bearish.

There were six new 20-day highs today from the 50 Leaders. That's the best we've seen for 14 days. But of those, five out of the six were intra-day highs which had reversed below the key level by the end of the day.

So - I think we have to take our cues from support/resistance and overbought levels. The market reversed off a key resistance level and stocks above the 10-Day SMA remains over bought at 80%. On those figures I'd expect more sideways to down action for a couple of days.

XAO Channel

Here's a chart of the XAO since Dec. 08. The index is now at a critical horizontal resistance level and just below the mid-line of the up sloping channel. As it is now overbought - this looks likw a logical place for the market to selll off. There might be another day in it. Of course, rampant bulls might have other ideas.

Market Comments - 11/11/09

Bit of a nothing day today. Opened up about 20 points, long sideways drift all day, closed up about 20 points.

The market continued into overbought territory with 92% of the 50 Leaders above the 10-Day Moving Average. This is now above the level it was at in the middle of October when the market sold off.

A little risk aversion evident today with the 50 Leaders up +0.5% marginally better than the Small Ordinaries at +0.4%, but nothing much in it.

Will it sell off tomorrow? Dunno - but the odds are higher now than on any of the previous three days.

Market Insights - 10/11/09

And the market is at significant resistance. We'll know tomorrow. Guts or glory.

Market Insights - 10/11/09

Ok - tomorrow is guts or glory.

The market is oversold.

Market Up-date 09/11/09

Once again the market is getting close to overbought in the short term.

The % of the 50 Leaders above the 10-Day SMA is getting close to the 80% level. The last time it was over 80% was 15th October - the beginning of the most recent pullback. One more day up should be the end of this small counter-trend movement (if today wasn't the last).

Gold/XAO Ratio Chart

The Ratio Chart of Gold/XAO is supporting the bearish prognosis for the general market.

In the past, it is bearish for the general market when the chart line of Gold/XAO rises above the 55-Day Moving Average. That happened this week. It is also a good sign to hedge by investing in the Gold ETF.

Week End Wrap - 06/11/09

The Indicators on the XAO are currently flashing a "sell" signal.

1. MACD below the Zero Line
2. RSI below 50.
3. Williams %R below -50.

From past experience, the probabilities now lie to the down-side on a medium term basis.

The market is currently very oversold - so some short-term positive action can be expected. But I'm not expecting it to last.