I expected a bit of softness today with the weakness in the Ozzie Dollar - but the strength of today's pull-back was a bit surprising.
Tokyo and Hong Kong also had fair sized drops with Tokyo down -1.13% and Hong Kong down 0.77%. So there's something in the wind.
Our market (XAO) was down -0.7%. The Small Ordinaries (XSO) was down a whopping -1.9%. Some of that can be attributed to the fall in the Materials Sector (-1.4%) - but even so the level of Risk Aversion was very high today. And remember I've been banging on for a while about the trend in Risk Aversion. Such Risk Aversion is often the sign of a market top.
The Advance/Decline Ratio was a low 0.55. We haven't seen figures like that since November.
The bulls still have the upper hand - but only just.
That major oblique up-trend line on the chart goes back to late August 2010. While that holds the bulls are still in charge. The XAO went close to touching that today.
Other bullish indicators still to be broken are the 65-Day Moving Average (even lower down on the chart than that up-trend line) and the stepped Super Trend Line which currently lies in about the same position as the 65-Day MA.
On the negative side today were:
- break by the MACD Histogram below the Zero Line
- break by the Williams %R below its mid-line.
A trifecta of bearish signals would be if the RSI also closed below its mid-line. It was just above today at 51.4.
If those three negative signals do eventuate and a break of that major up-trend line occurs, then I think the market will be looking at a sizeable pullback.
But - Dr Ben is still doling out the dollars. So you never know - after all, we're now living in Alice's Wonderland (or should that be Ben's Wonderland):
So many out-of-the-way things had happened lately, that Alice had begun to think that very few things indeed were really impossible.
Good luck
Red
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