Market Comments. 31/5/2010

Today, the market moved according to script. Down a bit on light volume.

I can't see much point in going into details. Today was just "noise". The market was on holiday because of the holiday in America on Monday for the Memorial Day.

We might see something of importance tomorrow reacting to futures movements in America or overnight developments in Europe. But Europe will also probably have a benign night.

The only point I'd make about today was that the sectors to show major movements of importance were Materials -1.2%, and Financials -1.0%. These are the two power houses of the Australian market. It might mean something, it might not.

We'll have to wait and see if there is strong follow through.

Cheers

Red

Market Comments. 27/5/2010

Technically, nothing much has changed today. The market (XAO) is in a sideways consolidation. These can break either way - but given the current trend - the most likely movement is downwards.

The ADX is still pointed upwards and indicated that the market is in a strong trend - downwards. Any further movement upwards in the market is likely to be short lived before it resumes its downward trajectory.

The RSI is still below 50 which is bearish.

The MACD is close to a positive crossover. If that occurs we will probably get some upward movement in the XAO but any upward movement is likely to be short lived. Traders, in my opinion, should be selling any significant rally.

Looking at the Slow Stochastic, it is heading upwards while the market is heading sideways. A cross below its signal line would signal a resumption of the down trend.

Cheers

Red

Gold Parabolic - 26/5/2010

Parabolic moves are simply awesome to watch. And we're seeing one now in the Gold ETF.

No one knows when these will finish. But when they do - they do so abruptly. So - if you're riding this one - be prepared to be nimble.

In the meantime - this continues to confirm the bearish outlook on the Australian stock market and the Ozzie Dollar.

Cheers

Red

Stalemate. 26/5/2010

It was stalemate today. The XAO registered an "inside day". (Today's candle is completely within the range of yesterday's candle.) Given today's stalemate - I have no idea about tomorrow. Let's just wait and see what tomorrow brings. (My studies of the A/D Line and NewHighs/NewLows offered no clues today.) My hunch is - another day of sideways consolidation. But - don't believe my hunches - they're worthless. :)

Now - let's put all that into context.

The ADX (a measure of trend strength) is above 40. A measure above 25 means that the market is trending. (The direction of the ADX has no bearing on the direction of the trend, it is just a measure of the strength of the trend.) The XAO is in a strong trend - downwards. So, the past three days (up, down, inside day) should be read at this stage as a pause in an ongoing downtrend.

Next, the 13-Day SMA is still heading down - signalling that the trend is still down.

Until proven otherwise - we must consider that the trend is down - so the current mini-rally should be sold into, not bought, as so many media pundits (real-estate spruikers in a previous life?) are claiming.

Of course, a trend can change. Divergence on the MACD histogram suggests it could. But let's wait for it to change before buying it.

For the time being, while the trend is marked as "down", rallies should be sold.

Anyhow - that's how I see it. You might think otherwise. DYOR.

Cheers

Red

Cheers

Red

Gold Comments. 25/5/2010

The Gold ETF (Gold in Ozzie Dollars) continues its march upwards.

Momentum may be slowing - see the negative divergence on the MACD Histogram from the price chart.

Until it reverses decisively (watch the indicators), it is best, in my opinion to stay with the trend.

At this stage, the Gold ETF is confirming the bearish character of the market (XAO). The Gold ETF, during volatile times, tends to move inversely to the XAO.

The trend is your friend. :)

Cheers

Redb

Market Comments. 25/5/2010

In many respects today was a reverse image of yesterday.

Following are the Advance/Decline figures for yesterday and today:

24/5/10	1,002	402
25/5/10	407	1,025

And here are the figures for AdvVol/DeclVol:

24/5/10	1,284million		288million
25/5/10	175million		1,720million

The figures for the 24th are extreme - but to get them virtually reversed the following day is even more extreme. This is getting really weird. :)

The chart above is somewhat esoteric. It is a relative strength chart of Advances/Advancing Volume.

The previous two times the ratio reached into the stratosphere were times when the market reversed significantly.

The first time was the dramatic finish to the June/July 09 correction which set in train the rise by the XAO up to the mid-October 09 high.

The second time was the less dramatic, but important, beginning of the Santa Rally which finished in early January 2010.

So - will history repeat?

We shall see.

There is no doubt in my mind that a significant rally will occur. Enough to reverse the current bearish sentiment? Maybe, maybe not.

With the market acting in such strange ways, anything is possible. To my mind, it means a very big move of far reaching dimenstions is coming. Which direction is the question.

Cheers

Redb

Market Comments. 24/5/2010

The XAO was up 2.0% today - but it was a strange day. And I'm not sure what to make of it.

On the one hand it bore out expectations that a continuation of Friday's big reversal would occur.

Volume in the first hour was a little above normal, but the day's final volume was below average. The market basically went nowhere in the first hour, then went up 2% from there - but on lighter volume. hmmm.

Next. UpVol/DownVol was 1284Million/283Million.

The Up Volume was fairly standard for a good up day. The down volume was well below average.

So - did someone or more than one try to hold the market down in the first hour - and then just threw in the towel and went to the beach? That down volume is the lowest since the Xmas period when most traders are ... yes, at the beach.

Today's move up was more due to a lack of selling than any strong buying push.

Given that most experienced hands were expecting a push up for a couple or so days (or at least I was), are sellers holding their hands for a short while before stepping in. A case of, "come in suckers - we'll nail ya in a coupla days". Or was today just an anomaly?

Let's look at a couple of other pieces of evidence.

The XAO was up 2%. The 50-Leaders were up 2.3%. The Small Ordinaries were up just 1.5%.

So - risk aversion was the order of the day, while risk appetite took a back seat. That doesn't support a big bullish move up.

We shall see.

Looking at the chart presented above. It shows the XAO for the past two trading days. The candles are five-minute candles.

The second half of today was a rising wedge - which is usually bearish.

So - we could see this mini-rally peter out tomorrow.

Cheers

Redb

MARKEt Comments. 20/5/2010

I haven't see any let up in the selling. It must happen, but it didn't happen today.

Now - let's just look past that comment and think about the future.

Yesterday I headed up the blog with "A significant day". If I'm right, we now have a major change in market psychology. The "why" is for others to ponder and write about ad infinitium.

Sell the rallies. That's the message. Up till now it's been buy the dips.

If you want to trade long, be sure to be quick on the sell trigger.

That's how I see things now.

If you're a long term investor - I have no words of advice. That's not my line. You might have bought Woolies back when it was $3 a share. Why would you sell now?

If you're a recent retiree without enough funds to see you through the next 20 years of fixed income - you might consider your options.

There was nothing in today's figures to suggest the selling has stopped - other than the fact the market is oversold. That means nothing. An overbought market in a bull market is good news. An oversold market in a bear market is bad news. It will probably get more oversold.

Any respite is just that - an opportunity to sell shares or sell short.

The market is grossly oversold - a relief rally is due. If I was long in this market - I'd be taking any up move as an opportunity to lighten up.

But - your situation would be different from mine. Do your own research.

Gold ETF, 19/3/2010

Gold ETF continues on its parabolic rise. There's no way of knowing when such rises will end. But when then end, they usually end with a thump.

The RSI is flatlining, suggesting that momentum is slowing. But that's all that can be said at this stage.

Short term, I'd take profits at a break of the first horizontal level marked on the RSI. A break below that might end this current uptrend.

Please - do your own research.

Cheers

Redb

A significant day. 19/5/10

I think the decisive nature of today's move obviates the probability (but not the possiblity) that we're in a bear trap. (Remember the head-and-shoulders pattern last year which had every technical analyst and their dog short?)

So - we're now left with the usual conundrum:

1. Support has been broken decisively which should mean further downside in the near future.

2. The market is grossly oversold, so it should bounce.

If you go with No.1 - No.2 will surely make you look like a goose.

Most likely scenario to allow for the two opposing views:

Some consolidation at or near the lows while the oversold condition gets worked off, then further downside. (Its just a scenario.)

I won't be going long this market until I get some solid signals to the upside.

I don't think we'll be seeing that for a long time. I now have in the forefront of my mind the scenario I sketched out for the year:

Just as a reminder - here's what I said at the end of 2009:

Decade Trend
Year 0 - Cyclical Peak, Bubble Top (1980, 1990, 2000)
Years 1/2 - Post Bubble Trauma
Years 2-4 - Consolidation and Recovery
Years 5-7 - Speculative Rise and Peak (mid-late 07)
Late 7-8 Collapse into Crisis. Central banks respond by slashing interest rates and opening the monetary flood gates
Year 9 - Cyclical growth
Year 0 - Cyclical Peak, Bubble top (2010?)
Begin again and repeat.

(The bubble top in Year 0 does not necessarily refer to the stock market but a significant asset class. The American stock market may fit the bill this year given its great rise since Mar 09. Chinese real estate is another likely candidate.)

We're also in the second year of the presidential election cycle (a four year cycle). The second year has usually been the worst performer in the cycle. Since 1937, the second year of the presidential cycle has been the worst performer in 14 of the past seventeen cycles. Two of the exceptions occurred in Eisenhower's era, when Year One was the worst performer. The third exception was in Dubya's time, when the fourth year (2008) was the worst performer. In that case, the Decade Cycle took precedence over the Presidential Cycle. Now - the two are in sync.

But - anything can happen on the stock market, and will occur to confound the best laid plans.

I won't be trading/investing, however, on the basis of these past statistics - but on how the stock market progresses (or regresses) from here. At the moment - it doesn't look great. The 10-Year Cycle and the Presidential Cycle appear to be playing out.

Good luck,
Redb

Does history repeat? Does the market rhyme? Is the Pope a Catholic?

The indicators I watch on the XAO for February and May are showing a high degree of similarity.

Next couple of days could be a bear trap.

Market Comments. 18/5/2010

You saw the market today. XAO finished right at 4500. That's the significant support level.

(Although Alan Kohler called it a resistance level on last night's finance report on ABC2 - go figure.:))

I've crunched the numbers. I can't see anything else of significance. I wish I could see more - but more telescope has a very limited range at this time.

Cheers

Red

Gold ETF, Update

Gold in Ozzie Dollars has been going parabolic . Parabolic rises invariably result in parabolic falls. If it starts to fall I wouldn't be hanging around for too long.

In my weekend emails I indicated that for me as a short term trader in au:gold (bigcharts.com), a sell signal would be hit if the RSI dropped below the horizontal line indicated on the RSI Pane.

That hasn't been hit yet. So - patience.

It may also give a clue as to the short term direction on the general market, which tends to run inversely to Gold. So, patience on entering long for the general market is also required. The fall in the general market may(?) not yet be over.

More on the general market later tonight when I complete all my analysis of the data.

Cheers

Red

Market Comments. 17/5/2010

The XAO is sitting on 4500 - critical resistance. So - the market was down 3.1% today. Sounds like a blood bath.

Was it?

Have a look at the volume chart.

Huge down days should be accompanied by huge volume? Right.

Not this time.

It looks to me like the mouse that roared.

The week before last we saw big down volume on the down days. Today (and Friday) we didn't. Go figure.

It looks like a case of "cowardy, cowardy custard" to me.

Cheers

Red

Market Comments. 13/5/2010

This market has a lot of confidence behind it.

Look at a couple of the charts above.

The Advance/Decline Thrust Chart is going straight up. That sort of direct movement is usually seen only in down movements, not in up movements.

Similarly, the 5-Day Average of the Force Index has risen vertically - and is now above the Zero Line and above the 13-Day and 21-Day Moving Averages.

Those two charts provide a vote of confidence in this market.

Volume has been sound - without being outstanding.

Is the market over-sold?

The stocks from the 50-Leaders above the 10-Day Moving Average has just reached 50%. That's not oversold. Williams %R and RSI are a long way from being oversold.

Looking at the negatives. The 200-Day Moving Average lies overhead. That may provide resistance. Remember - resistance is just that - not a brick wall.

We can expect some hesitation here - some consolidation. Given the strength so far in this run-up, some consolidation can now be expected.

But - there is great confidence in this market from powerful forces. In the medium term, I think those forces will prevail.

In the short term, I think we'll have some hesitation.

We shall see. What I think is immaterial. Keep watching the market - and do your own research.

Market Comments. 12/5/2010

The market today (XAO) was up 0.6% and finished almost exactly on 4600.

The day's trading was choppy, a lot of huffing and puffing while the market continues to digest Monday's big up move.

Nothting much has changed. The only thing of significance to comment on, in my opinion, was the drop in Telstra's share price. It looks like the shorters are getting stuck into Telstra.

That may be a positive for the market. Telstra has been one of the best performers during the recent dramatic fall in the market. Given its good dividend, Telstra offers a safe haven in bearish market conditions. So now that the fear could be evaporating - the plug is being pulled on Telstra given the negative sentiment being thrown up by government posturing.

But - who knows. Maybe something else is going on with Telstra that you and I know nothing about.

The market was up today - that's a positive.

The A/D Ratio was a healthy 1.43.

Volume was down a bit.

This market isn't out of the woods yet. But it continues to perform positively.

So long as 4500 on the XAO holds, all looks well from my perspective.

Market Comments. 11/5/2010

Hi Folks,

The market is the focus of much commentary every day. Every major newspaper of any substance has a section devoted to "business" with much of that talking about what happened on the stock market.

So, if you read the business section tomorrow morning on the Australian market, you will, no doubt think, a lot happened today.

What do I think? Does it matter? Probably not. Yeah - well - I only write this blog because I'm an out and out egoist who thinks what I think matters. :)

So - did much happen today? In my view - not much.

After the big day up yesterday, the XAO was down 1.07%. That's substantial, in the language of most people. And that's reasonable.

But here's another statistic.

The Advance/Decline Line went up today. The A/D Ratio today was 1.1. That's positive.

The Consumer Discretionary Sector was down just 0.1% today while the Consumer Staples was down 0.7%. That's a vote in favour of the Australian economy.

Just my opinion - today's drop was simply "noise" - a minor reaction to yesterday's rise and nervousness about overseas conditions and tonight's budget.

So long as 4500 on the XAO holds - there's no reason for any concern.

And if you believe what I say - I would also suggest you go and seek independent professional advice. :)

Cheers

Red

Market Comments. 10/5/2010

Hi Folks,

This is my first blog since coming back from Turkey.

Yesterday, in my email to subscribers, I indicated the following buy criteria:

1. A break of the RSI down trend line would be an initial buy signal.

2. A cross by the RSI above 50 would be an “add” signal.

3. A cross by the MACD above its signal line and then above its zero line would be a further “add” signals.

The first of these buy has been met.

The Williams %R has also broken above the resistance line shown on the chart - confirming the first buy signal.

The chart of the Advance/Decline Line showed a positive divergence from the XAO as of Friday. This suggested that the current down trend was just a pull-back in an ongoing bull-market. If this pullback was to end the bull market, I'd expect the A/D Line to have broken below the February Low. It was a long way from doing that.

The upward movement today on the XAO (2.5%) on good volume was suitably strong enough to suggest, in my opinion, that the current pullback is over.

I'll look at further statistics as the night progresses, and if anything contrary occurs in the statistics, I'll post a further comment tonight.

Otherwise, that's it for today.

Cheers

Red