Strange Days Indeed 28/10/2010

Well - you have no doubt been inundated by information about the wonderful performance by th ANZ Bank. Now pollies have more reason to bank bash (particularly if you are in opposition).

What did the market think of it? The Market? That's the beast made up of all the dumbest brains in the trading industry, and all the smartest brains in the trading industry. And all those who are not so bright, but not so dumb (like me).

The dumbies - they pile into the market at the beginning of the day on the basis of news.

The smarties - they act later in the day to take advantage of the dummies not so smart move.

The not-so-smart-not-so-dumb (like me) sit on the sidelines to see who wins - and hopefully follow the smart money.

What's the smart money doing? Well - it looks like they think the ANZ result is a lot of old cobblers and their money should be in miners like BHP and Rio - and any others you would like to name.

CBA today made a new 20-Day Low. Go figure.

The market today was up 0.7%. Not a poor effort. But it was an inside day - a day of indecision.

And that's reflected in the above charts. But the smart money is still betting on the miners.

Let's see what tomorrow brings.

Cheers

Red

Gold ETF as at 27/10/2010

Given today's reversal down on the XAO, our trusty counter trend stock (Gold ETF) had an even more convincing reversal up.

The short term down trend has broken to the upside.

The reversal has occurred off the 20-day low (yesterday).

Indicators are turning positive.

Let's not get too excited about this. Until the stock gets above the recent high around the 136 level, this stock remains in a sideways trend. Just like the XAO.

Patience is required.

Cheers

Red

Market Comments 26/10/10

Today's move down was no mickey mouse affair.

Volume was high - the highest since the opex days back in September - and today's trading was not influenced by opex which invariably shows an increase in volume.

Go - figure. Today was a major distribution day.

Does that mean we've changed gears into reverse? Maybe - but we won't know whether this is a trend change to the sideways or a major trend reversal to the down side for a few days yet.

The area just under 4600 looks like strong support. If that breaks we might be looking at a major trend down for some weeks. Until that happens - keep the powder dry.

But - I won't be buying into this market until direction becomes clearer.

Today's action looked decisive - a major distribution day right at the high of the recent run-up.

This is no time for sackcloth and ashes - although such a time might not be far away.

The stock market is always dynamic.

The current short term trend is down.

The medium term and long term trends are still holding to the bullish side.

Pullbacks are an inevitable and healthy part of the market structure.

Short-term trends can, however, morph into medium term and long term trends.

Caution is required.

I may have a further update when I get time to look at the weekly and monthly charts.

Cheers

Red

Market Comments 26/10/10

Today's blog is somewhat longer and more considered than my usual daily posts, which are meant to update readers of current happenings in the market.

I think, however, that the market is getting to a crucial point; so I've included more charts and more commentary than usual.

First, a recap of today's market action which was a vote of indecision - a narrow range day, inside the range of the previous day.

The dominant trend lines - horizontal and diagonal - are suggestive of another move down. Horizontal resistance was hit, and the market fell. The "death kiss" (a hit from underneath of the uptrend line) resulted in the market falling today.

A break below 4600 and the most recent diagonal uptrend line would be negative for the stock market.

A break above the high of yesterday would be bullish.

Now - down to the important stuff.

The Advance/Decline Line has been on a scream higher for many weeks - suggesting that this market has plenty of oomph behind it. It is now way above the April high while the general market indices are still well below. Breadth has been very strong and leading the market upwards.

The RSI for the A/D Line has, however, been in decline since mid-September. Momentum in this indicator is slowing. Before an index drops, momentum must first drop. That doesn't mean that the primary indicator must drop - only that momentum is slowing, and could drop.

Next, the Cumulative Reading for the 20-Day NewHighs/NewLows on the 50 Leaders is in a sideways movement.

This Indicator bottomed out in early July. During the August retracement in the market, this Indicator simply went sideways, giving a positive divergence from the Stock Market Indices. The market then went upwards confirming the positive reading on the Cum NH/NL reading for the 50 Leaders.

We're now coming to a somewhat similar situation. The Cum NH/NL (50 Leaders) is trending sideways. But, in this case, the general market is still trending higher - albeit slowly. A negative divergence. Momentum is once more indicating a possible trend reversal.

We have a indications that the market has reached a tipping point (see trend line comment). Breadth indicators are showing a slowing in upward momentum.

That doesn't mean the market must reverse and go down.

But it is a warning sign. Caution is required.

Gold ETF as at 25/10/2010

Gold is fulfilling its role as a reverse image of the XAO. While the XAO today hit a new 20-day high - Gold hit right on the 20-day low line.

The Slow Stochastic for Gold is right down on Zero - its lowest level since July. A bounce looks highly probable.

Meanwhile, the MACD for Gold remains above the Zero line - the demarcation between bull and bear.

So, if Gold can reverse to the upside here, the bullish scenario remains alive - and that's a negative for the Australian stock market.

Cheers

Red

Market Comments 25/10/10

Today's action was a strong up movement. Up +1.3% on the XAO. Volume was lighter than the 50-Day Average. Volume tends to be lighter on a Monday, so it's difficult to know just how much significance to make on today's volume.

It is significant is that today's action took the chart up to hit the uptrend line from early September. This is often called "the kiss of death". But - you've heard of "Lazarus"?

A significant negative divergence exists between the short-term RSI.4 and the chart of the XAO. That provides some support for the "kiss of death" scenario.

The trend is still up. That's all that matters.

Cheers

Red

Gold ETF as at 21/10/2010

The Gold ETF usually trades inversely to the Australian Stock market (XAO/XJO).

Currently it is trending sideways just like the Australian Stock Market. Both appear poised to make a decisive move.

Which way?

Let the market tell us.

Cheers

Red

Market Comments 21/10/2010

This is looking less and less hopeful for the bulls.

• MACD below its signal line
• Two day break below the uptrend line from late August
• RSI.14 below 50

Until the market breaks below the 4550 area on the XJO (or 4600 on the XAO - All Ordinaries Index). Perhaps this is just a counter-trend rally providing a buying opportunity.

Cheers

Red

Gold ETF as at 20/10/2010

The Gold ETF remains in a non-trading pattern. It is currently positive - but only just - typical of a non-trending stock.

Clearly, a negative result for the XAO would be positive for the GOLD ETF. and vicky verco.

We continue to wait on a definitive move in direction on these two key indicators - XAO and Gold.

Market Comments 20/10/2010

Clearly today was not kind to those of the bullish persausion. Nor was it all that satisfying to those of the bearish persausion.

The uptrend line from late August was broken to the downside (the bears cheer) but the XAO finished up short-term support (the bulls shove an indignant digit in the air).

While the XAO maintains its stance above the 4600 area, the trend remains up.

Cheers

Red

Gold ETF as at 19/10/2010

The Gold ETF on the ASX is, like the XAO, in a holding pattern. The ADX is showing a non-trending market.

The chart and the 150-Day SMA are in a slight incline upward - but not enough to be convincing that this is a tradable trend. The ADX is below 15 - a non-trending market.

Let's wait and see.

Patience is the greatest virtue in trading. Wait and wait and wait. When the sideways shuffle finishes - and that could take a while - that will be the time to act. But until that ends - we shall wait and wait and wait.

Cheers

Red

Market Comments 19/10/2010

The market remains in a holding pattern.

One of the more absurd comments I heard today was by a TV commentator who said that the market was in a holding pattern before Melbourne Cup Day. To give him some credit for intelligence (I'm a generous fellow) I think the implication was that the Reserve Bank meets that day. But, hell's bells, we've been in a holding pattern for many days now - the plane is out of fuel. :)

Events overseas will have a much greater impact than either the Melbourne Cup or the RBA meeting. The RBA meeting on interest rates might have an impact for a couple of days - then it will be quickly forgotten in the wake of international events.

In the meantime .......... I'm not waiting on Melbourne Cup Day for guidance.

The market was flat today. But it was better than it seemed despite the sell-off in the afternoon to bring the market down.

The A/D Ratio was 1.13:1 while the AdvVol/DeclVol was a sound 1.9:1. That gives a Trin reading of 0.59 which is very bullish. Anything under 0.9 is considered bullish.

That doesn't mean the market will be up tomorrow. Just consider the reversal day today as not very important.

The trend line shown on the chart above is the thing to watch. A break below that would be bearish. A break below the 4600 area would be a big big negative.

Cheers

Red

ASX Gold 18/10/2010

Gold ETF (Gold in Ozzie Dollars) continues in its sideways shuffle with a slight upwards bias.

There's still not enough in this to declare a "buy" signal.

A break by the ADX above 20 with an upwards break by the stock above the 1356 area would be advantageous.

This is still a day by day proposition - not enough reward/risk benefit yet to say "buy".

Market Comments 18/10/2010

This looks like it is setting up for a short term retracement.

• Bearish rising wedge
• Negative divergences on the MACD, RSI and W%R.

Be careful.

Gold ETF as at 14/10/2010

The Gold ETF (Gold in Ozzie Dollars) continues in its sideways drift. It is currently held in a long symmetrical triangle. A break either way out of that triangle on good volume should determine future direction.

The Gold ETF has a strong inverse correlation to the Australian stock market over a medium term time span. If the Gold ETF breaks upwards, that would be a negative for the XAO. A break downwards would be positive for the Australian stock market (XAO).

Watch this space.

Cheers

Red

The market had a strong up day today with the XAO up +1.6%.

Looking at the momentum indicators - momentum has slowed. The MACD and RSI are going sideways. ADX has fallen from a trending signal to a level between trending and non-trending (about 25).

Looking at a weekly chart of the XAO, we can see that the Slow Stochastic has now dropped below its signal line and below 80.

That doesn't mean this market is a "sell", just that momentum is now much slower than earlier in the uptrend.

It could be a signal that the market is about to reverse, but not necessarily. It could be in a consolidation pattern.

Looking at the Slow Stochastic on the weekly chart - we can see that it each retracement has been making higher and higher lows. That's the sign of a strong market.

Until that sequence is broken - (a lower low) - this market remains bullish.

What's likely to happen tomorrow? Dunno - I'm not really into that sort of stuff. But when I look at my short term indicators - they seem overbought. I'm not expecting any great surge in the near future - just more of the same. Down a bit, up a bit more.

Cheers

Red

Market Comments 13/10/2010

No fancy stuff tonight. Just plain old trend channel. Boring. Boring. Boring.

Yeah - I know it's boring - but it works.

XAO has been in a a narrow uptrending channel for about a month.

A break lower still has to contend with solid support at around the 4600 area. If that breaks, the market looks like going a lot lower.

Seasonal factors (October effect) would suggest a test of the 4600 area.

But today's action was not a convincing day for the bears despite the reversal from earlier strength. UpVolume/DownVolume Ratio was good at 1.9:1 while Advancers/Decliners was at 1.24:1. That gives a bullish reading of 0.65. A reading less than 0.9 is considered bullish. So today's figure is quite strong.

I think we're looking at a few more days of cyclic weakness - but nothing of great significance.

If the market goes below 4600, then all bets are off.

Be patient.

Cheers

Red

Market Comments 12/10/2010

Welcome to Whip Saw City. One day you're up, euphoria, wait a couple of days, you're down, depression.

The current trend has a slight upward bias with increasing range expansion. Not a good sign. It often signals a top.

Today's action did a lot of technical damage.

I try to keep these daily blog entries short and pithy. So I try to pick a chart (an unusual one not readily available) to illustrate a point. I'll have a few more charts than normal today.

So - to illustrate the technical damage issue, I've put up a chart of Net 20-Day NewHighs/NewLows for the 50-Leaders.

The chart has broken below an up-trend line in existence since July 2010. That's a significant negative development.

The top chart is a chart I had in my weekly email report. It shows that the Australian market (XAO) tends to follow a four-monthly trend from low to low.

If the chart follows this cyclic trend, then the next couple of weeks could be rugged. There's no way of knowing just where it will finish - but there's good support down below at around the 4600 mark. If we get down to that and bounce, then we'll probably look forward to a good few months of upward movement.

If the market gets down below that, all bets are off.

Cheers

Red

Gold ETF as at 11/10/2010

The Gold ETF (Gold in Ozzie Dollars) continues in its sideways, non-trending fashion.

The ADX is down around 12 - indicative of a non-trending market.

Gold ETF had a rush of blood in the middle of last week, promising a break-out, but it petered out.

Today was another up day - but not enough to read anything into it.

I'll continue to wait on a significant move by the Gold ETF.

Market Comments 11/10/2010

The Australian market (XAO) had a small move up today, about +0.5%, to finish at 4762.

Risk appetite was still solid with the Small Ordinaries up 1% while the 50-Leaders was up 0.3%.

The main driver of the market today was Materials, up +1.2%, while the Financials sector was flat, 0%.

There's no sign there that the market is either overheating or inclined to revert to the downside.

This market is a Goldilocks market, not too hot, not too cold, just right.

If Financials join the party - we could see some real sparks flying.

Cheers

Red

Market Comments 7/10/2010

I don't often show weekly charts on the blog, which is meant as an update to my more comprehensive weekly report sent out by email.

However, since we had a bit of a lull today with the market up just a bit, I thought it worthwhile to show the weekly state of affairs.

The lower chart shows the XAO is in a nice uptrend and currently hugging the top of the channel. The market seems to have good support now from the 30-Week Moving Average (equal to the 150-Day MA). While the market remains above that benchmark, we must presume the bull is back with us.

The StochRSI.30 has plenty of room to move up before it hits the overbought level of 0.8 and if history is any guide, it can stay above that level for a couple of weeks before falling.

The RSI.4 is showing some signs of overheating being above 70 so we might have a bit more consolidation before any serious move upwards occurs.

I still feel uneasy about this market and the top chart shows why. Again this is a weekly chart but shows the Slow Stochastic. It's been up in the overbought region now for four weeks. That's starting to get a big long in the tooth. How much longer it can stay up there before suffering a serious fall-back is anybody's guess.

That indicator continues to make me a bit cautious. I'd like to say that this market is now heading much much higher. It's had a good period of consolidation which has laid the ground work for further upward movement.

But if that occurs - then the XAO will break upwards out of that channel and the Slow Stochastic will stay in the overbought reading for even longer.

That seems to me to be doubtful at this stage.

But - the market can do anything it likes.

If the XAO does break out above the current channel - then we're in the throes of a very bullish market. Given that we're now well into October, that may be possible.

The market seems destined now to go higher in the medium term, baring some sort of cataclysmic event - e.g., Terror Attacks in Europe, devastating hurricane in the Gulf of Mexico, or any other fearful thing you can think of.

When the bull starts rampaging - it will take something like that to stop it.

Cheers

Red

CAC

Yesterday, I noted that CAC had broken below a head and shoulders top.

Well, that signal got well and truly neutered in last night's action.

The chart is still below the 13-Day SMA. So it still has some legitimacy. But not much.

Cheers

Red

Market Comments. 6/10/2010

The market was up strongly today, with the XAO up 1.63% on above average volume.

All S & P Sectors were positive.

The intra-day high today broke marginally above last Wednesday high.

This certainly looks the goods - yet - many indicators still show negative divergences.

Let's see is there's follow through buying tomorrow.

Cheers

Red

Market Comments. 5/10/2010

Today the XAO finished down -0.4%. After an initial big drop the market recovered considerably then got a big boost when the RBA announced the interest rate decision.

Most of the action from there on was concentrated in the Financial Sector with the banks finishing about square on the day, but the Materials still down -0.9%.

The day had a clear defensive tone with the only S&P Sectors being up were defensives:

• Consumer Staples +0.7%
• Health +0.3%
• Utilities +0.6%

So, the day was a clear reversal day - but not a particularly bullish tone to the final result.

Let's see how the market fares tomorrow before getting carried away with the rise in the market during the last 90 minutes.

Given the action overnight in the CAC and today's action in the Gold ETF - I don't have a lot of confidence in the market direction being positive over the next couple of days.

But - you never know. It might surprise to the upside.

Cheers

Red

At the week-end I said:

If this market is to weaken considerably in October look for:

• a break by the Index below the support area of the June/August highs,
• a break by the MACD Histogram below its Zero line – that has occurred,
• a break by the RSI.9 below its mid-line – that has occurred.

I'm still waiting for the break below the June high. And then the August high, which is a little lower, needs to break.

We're getting plenty of warning signs - see this morning's blog and this evening's blog regarding the Gold ETF.

But - until we see those horizontal supports cave in, we have to presume this market is still bullish.

Cheers

Red

Action in Gold ETF 5/10/2010

The Gold ETF has broken out to the upside. A "buy" signal.

This has been confirmed by a similar break-out on the Gold/XAO ratio chart.

A break above the 55-Day Moving Average would be an "confirm" signal.

Cheers

Red

Danger Will Robinson. Morning. 5/10/2010

The French CAC completed a head and shoulders top last night and is now clearly in a down-trend.

The French market is often a good leading indicator for the SPX.

Be careful

Red

Don't believe today - 4/10/2010

Today the market was up 0.9%. And half of Australia was on holiday. And it showed in the volume stats. Volume today was 641 million shares traded. The 50-Day Average is 1,220 million shares traded. So volume today was about half of the usual volume.

The XAO (All Ordinaries) was up 0.9%.

The XFL (Fifty Leaders) was up 1.1%.

The XMD (Mid-cap Fifty) was up 0.6%

The XSO (Small Ordinaries) was up 0.4%.

The only people at their desks today were the junior clerks who had their orders to keep the blue chips up. Everybody else was in the shopping centres. Or the Ferrari salesrooms. :)

Now - can I divert your attention to the chart above.

BHP. A thing of beauty. The chart - not the stock. Better than any Ferrari.

An upsloping wedge, at horizontal resistance.

hmmm.

Crunch time.

It either goes up big time or goes down big time.

My gut feeling says down.

Cheers

Red