Today, the short term sell signal from Monday and the dragonfly doji from yesterday played out - as expected, to the down side.The action today was a bit nasty - the XAO down 1.4% on the highest volume on the XAO for the past eleven trading days.
Nine out of ten industry sectors were down. The only sector up was Utilities, up marginally +0.2%
An anomaly today was the Property Trusts - up +0.8%. Why? Beats me. None of the three big property trusts (WDC, CFX, SGP) had any news or announcements made. But, I'm just a simple chartist - so a lot of things are unfathomable to me. I'll just keep watching the charts.
Another anomaly today was the divergence in the 50-Leaders/Small Ordinaries. The 50-Leaders were down 1.7% while the Small Ordinaries were down only 0.4%. This suggests that risk taking was still high amongst the punters. I'm surprised by these figures today. The only explanation I can come up with is that many retail traders (who may represent the "dumb" money) were presuming that this drop is only short term and they were getting in to grab some "bargains". It's just a thought. But maybe this anomaly is telling us to not take too seriously the big drop today. I can't really accept that given the volume behind the drop. The anomaly is not backed by the UpVol/DownVol ratio - which was a bearish 0.56. That's almost 2:1 in favour of the Down Volume. But perhaps that is skewed by big volumes in Materials and Financials which were both well down today. So - to cut a long story short - I don't know what to make of it.
The 50-Leaders above the 10-Day Moving Average was giving an overbought reading a couple of days ago - so that, with the RSI2 signal provided clues to the sell-off.
It's interesting that the retracement of the 50-Leaders above the 10DSMA has been fairly orderly. The chart line (blue) still shows higher highs and higher lows. Another down day tomorrow may break that sequence.
The Advance/Decline Thrust chart (top chart) is suggesting that the high has been seen for this short-term cycle.
The formula for the A/D Thrust is:
- Thrust = Sumadv/(Sumadv+Sumdec)
- Where Sumadv = Sum of Advances over the last 5 days,
- And Sumdec = Sum of Declines over the last 5 days
After hovering for over two weeks, the chart line has now broken down below the three-period moving average. That's a sell signal.
The three day candle formation on the XAO is a classic reversal pattern confirming yesterday's warning doji. This pattern is: large white candle, doji, large black candle.
Expect further downward movement.
Cheers
Red
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