Initial Comments, 19/01/2010

I don't often show an intra-day chart - but I thought I would today to show clearly that nothing much has changed. Despite the solid down day to-day on the XAO (down almost one percent), the main index remains in a trading range. That's confirmed by eye-balling the MACD and RSI on the chart which are basically going sideways. The RSI hasn't dropped particularly low or got up particularly high. At no time in the past four days would you say it had become oversold or overbought.

The MACD is below the Zero line - which is the bearish level. So I think we can expect more downside before a solid sustainable move up occurs.

This is confirmed to a degree by the 5-Day Average of the Net Advancers-Decliners which, although getting low, still hasn't hit a level where you'd say it's gone far enough. That usually occurs somewhere south of the -100 level and we haven't reached there yet.

To get down to that level we need to see the Advance/Decline ratio at around the 0.6 level. Today it was 0.75. The previous lowest reading on this retrace was 0.7 last Wednesday.

But - anything can happen on the stock market. But I'll be surprised if we don't see a lower low than today's by the end of the week.

One more comment. The 50 Leaders today was down -0.9% in line with the general market. The Small Ordinaries were down -1.3%. The differential is not huge - but enough to say that punters are still on the defensive - and that's in line with the down day to-day. Until a bit of risk taking comes back into the market, we can expect further downside in the near term.

I'll add to this comment later tonight after I've done some more analysis.

Cheers

Red