Market Comments 7/12/2010

Today I'm offering two charts of the XAO - a daily chart and a weekly chart.

First, the Australian market had a strong day today. Up +0.77%. That's not spectacular, but strong. Despite what you read in the daily news, the Australian market often leads the American market, not the other way round. Last night in America, the Dow Jones was down,

-0.17%.

When you see a positive divergence like this between our market and the Dow Jones, you can almost guarantee the American market will be up following the Australian market, at least in the first hour (until further news comes in).

Next - have a look at the divergence on the indicators on the Australian market - particularly the Slow Stochastic (weekly and daily). The Weekly Slow Stochastic has just crossed above its signal line. That's a bullish move. One only needs to look at other recent bull crosses on the weekly Slow Stochastic to see how positive that is.

On the other hand, the daily Slow Stochastic has risen above the 80 line - the overbought line, suggesting that a short term retracement is not far at hand.

That discrepancy should be welcomed by traders. It means that it is now "buy the dips" time.

This is not a market to be entering just now - but a great buying opportunity is just a few days away.

That's my opinion. You might have a different one. DYOR.

EVENT STOCKS:

Stocks from the 50-Leaders on Life Support (RSI below 30): NONE.

Stocks on the Critical List (RSI below 40):

Coca Cola Amatil, Fosters, Wesfarmers, Woolworths.

Stocks looking Buff (RSI above 60):

BHP, BSL, CSL, Lend Lease, Oil Search, QBE, RIO, Sonic Health, Worley Parsons.

Interesting - all the stocks on the critical list are from the Consumer Staples group - that's a defensive sector. Defensives are out of favour. That's a bullish sign. Again, that's just my opinion. DYOR.

Tomorrow morning I'll put up another chart, showing the short term overbought status of the market using the RSI.2 as a benchmark. I can't get that data until tomorrow morning. So look at it - if you're thinking of entering the market now - you might think again.

That's all for tonight.

Good luck

Red