Today was a solid day on the Australian market with the XJO up +0.5%. Breadth was solid. The Small Ordinaries was up +0.8% while the 50-Leaders was up +0.4%. That's the sort of result we expect on a bullish day.Financials suffered (-0.7%) while the materials were up solidly (+1.5%).
All that looks good ... until we turn to a more general look at sector movements. The Defensives all had solid up days and out-performed the general market:
- Consumer Staples +1.2%
- Health +1.3%
- Telecommunications +1%
- Utilities 1.5%
All of those figures are more than just a bit better than the general market. Those are significantly higher. Something to be concerned about.
Next let's look at the two charts above.
The top most chart shows the XJO (ASX 200) is still within the bounds of a bearish upsloping wedge.
The lower chart shows the XJO overlaid with an RSI.2 (a two-day Relative Strength) Indicator.
Whenever that Indicator rises above 90 and then falls we can expect at least a day or two of weakness. At times, at the end of an extended rise in the market, it often indicates a top of intermediate time scales.
Such a sensitive Index can be easily proven wrong. But put into the context of the chart pattern and the rise in the Defensives, it takes on added significance.
No guarantees. But I'm still not convinced about the further upward impetus of this market move.
I can easily be wrong. But - personally, I won't be entering any long positions just now.
As always - do your own research and take responsibility for your own actions.
Cheers
Red
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