Morning Coffee. Friday 1st April, 2011

Morning review:

America

1. Dow Industrials -0.25%
2. Dow Transports +0.44%
3. SP500 -0.18%
4. Russell 2000 +0.38%
5. Nasdaq100 +0.11%

Comment: Mixed day. See Technical Commentary below

Europe

1. France -0.88%
2. Germany -0.22%
3. London -0.16%

EWA (Australian Shares ETF traded on the New York Stock Exchange). +0.3%

Australian Dollar remained above 103 last night. +0.04%. That's a positive for our stock market.

Looks like we'll have a shaky start to our market today.

Technical Comment on the American Market:

1. Current run-up in the Dow Industrials is similar in scale and time to run-ups in June/July 2010.
2. Index is now at February high
3. Negative divergences on RSI and MACD
4. Stochastic is overbought.
5. Narrow-range bar last night on heaviest volume in eight days.
6. Market struggling to get past significant resistance.

All that adds up to the probability of at least a mild-pullback. The current resistance area around 12390 in the Dow Industrials is significant. If the next night is a big down day - expect further weakness.

That assessment is similar to the one I posted about the Australian market last night. Australia often leads significant moves. So I'll be watching today's action in Australia very carefully.

Do your own research. Don't take any notice of what I say. :)

Good luck

Red

Post Prandials 31/4/2011

Nothing extreme about this chart - but it's getting close to where a pull back might be expected. It could happen now - but there might be a bit more dancing to do yet.

The XJO is into a serious resistance zone. Stochastic is up there in the overbought area. RSI is up in the area between 60 and 70.

If we're into bear market psychology, that's good enough to suggest a pullback and that the current upswing is just a bear market rally (dead cat bounce).

If we're still in bull market psychology - then there's more in this.

The next few days should tell us.

Of concern today:

1. Today's bar is a narrow range bar on heavy volume (heaviest volume of last eight days)
2. Advance/Decline Ratio for the 50 Leaders 0.92:1 (bearish).

Those two stats suggest smart money selling to dumb money.

That doesn't mean the market must fall. Wait for the next day. If tomorrow is a solid down day, then we're probably back into bear market psychology.

Good luck

Red

Morning Coffee 31/3/2011

Hi I'm back.

Morning review:

America

1. Dow Industrials +0.58%
2. Dow Transports +0.29%
3. SP500 +0.67%
4. Russell 2000 +1.31%

Comment: Solid rise. Good Breadth in the small caps.

Europe

1. France +0.92%
2. Germany +1.77%
3. London +0.27%

EWA (Australian Shares ETF traded on the New York Stock Exchange. +1.45%

Australian Dollar topped 103 last night. +0.33%

Looks like we'll have a solid start to our market today.

Technical Comment on the American Market:

1. Current run-up in the Dow Industrials is similar in scale and time to run-ups in June/July 2010 (see circled arrows).
2. Index is now at February high
3. Negative divergences on RSI and MACD
4. Stochastic is overbought.

All that adds up to the probability of at least a mild-pullback.

A solid push through the level of the February high would be very bullish.

The ratio chart of Commodities:Bonds has shown weakness in the past three days while the Industrials Index has continued strength. The market is suggesting, at least in the short term, that bonds are a better bet than commodities. That's not a good sign for stocks. Now - that's a very short term movement - it might or might not mean something. But worth keeping in mind.

If our market sells off late today - it could just be a bit of book squaring for the end of quarter. But given the state of the Dow Industrials - it could signal the start of a pull-back.

I think I'd be looking at taking some medium term profits today if the market looks weak in the afternoon. That's just me. Remember, I'm just an elderly bloke sitting at home trying to make sense of all this stuff.

Good luck

Red

Saturday Morning Review 19/3/2011

Dow Industrials +0.71%, Dow Transports +0.73%, SP%500 +0.43%, Russell 2000 +1.16%, Nasdaq100 -0.19%.

Those figures looked reasonable until we got to the Nasdaq100. Apple is struggling. It's formed a double top. Not a good sign.

Europe: London +0.39%, France +0.63%, Germany +0.11%.

VXX (ETF based on the VIX - the FEAR INDEX) remains in an uptrend.

The market has had a couple of days Rest and Recreation from its downward plunge. Solid resistance lies ahead around the 12000 area on the Dow Industrials. The Nasdaq100 (and particularly Apple) need to join the party if this market correction is over.

News from the MiddleEast/North Africa, Japan (and whatever other Black Swans might fly overhead) may continue to dominate market direction.

Speaking of Black Swans, China on Friday once again increased reserve requirements of banks. That's the third increase this year. Monetary policy basically has three tools it can use to slow or speed up an economy: reserve requirements of banks, interest rates, and "printing money" (expansion or contraction of the Money Supply through the buying or selling of government securities). So far, China has been using the Bank Reserves requirement to slow their economy. If that doesn't satisfy the monetary masters in China, the next step could be interest rate increases. And that might really put a dampener on world stock markets.

Barry Ritholtz has a weekly summary of macro events in his blog:

http://www.ritholtz.com/blog/

Good luck

Red

Quick Comment. Friday Evening. 18/3/2011

Not much to say tonight. The scenario penned last night came to fruition today. The market moved up explosively - no doubt powered to some extent by short covering.

The All Ordinaries up +1.67%.

Volume was exceptionally high. Volume was higher than during the big pullbacks and reversals in May 2010. I had to go back to August 2009 to find a higher volume. That was during a brief decline and recovery when the recent memory of the GFC played with people's nerves.

Small Ordinaries were up very strongly +3.4%. There'll be some more in this yet.

This may well have ended the correction.

American Futures are currently up nearly 100 points. Although it's some time to go till opening of the American market, rarely is such a premium dissipated - so we should see a strong night in America and that will give our market more confidence for Monday - barring Black Swans. :)

More over the weekend.

Good luck

Red

Friday Morning Review 18/3/2011

A strong rise on the Dow Industrials +1.39% and a similar rise on the SP500 +1.34% and Transports +1.4%. The Russell2000 was a more anaemic +0.46%. We need to see more strength than that in the small caps to believe that this rise is sustainable.

Europe. London +1.75%, France +2.43%, Germany +2.2%.

The Ozzie Dollar was smacked again -1.44% and marginally below major support at about 0.98. A strong Ozzie is needed to sustain advances in the stock market. Today's weakness is not encouraging.

Looking at the chart of the Dow Industrials - today was an "inside" day. That's neither bullish or bearish. None of the major indicators broke above their down trend lines. Follow-through buying is needed to believe that today's action is starting to reverse the bearish action of the past month. And I'd like to see some relative strength returning to the small caps.

How is Japan going to fund the reconstruction of their devastated country? It is already one of the most indebted countries in the world (debt-to-GDP ratio 200%). A sobering analysis is provided in an article at Safehaven (see blog-roll) entitled Japanese Fallout May Hit Treasuries. Such bearish articles inevitably appear when pessimism rules - but the analysis is worth keeping in mind.

Here's a link:

http://www.safehaven.com/article/20313/japanese-fallout-may-hit-treasuries

Good luck

Red

Late Night Musings Thursday 17/3/2011

I've been doing all sorts of number crunching (as I always do).

But I thought this was worth passing on.

The 50 Leaders today was flat.

Advancing issues: 18

Declining issues: 28

In the ten market sectors today only two were up and one was flat.

The two sectors up today were: Energy and Telecommunications.

The flat sector was Health.

I would think that Energy is up on the basis that Japan will need more LNG and Coal from Australia in light of the nuclear disaster in Japan.

The other two sectors are defensive sectors.

Woodside Petroleum (WPL) was up 2.15% today. Woodside is a big supplier of LNG to Japan.

MacArthur Coal was up 2.01% today.

Today's rebound was impressive - but it was not a broad market rebound. The rise was basically defensive and energy related.

We need to see a broader base than this. That might come tomorrow. I hope so. But I wouldn't bet on it.

Good luck

Red

Market Comments. Evening 17/3/2011

This is the most promising chart we've had for a long time.

Today's long-legged doji candlestick is clearly the most promising candle we've seen so far in this decline. A big down opening and then the market clawed back to finish flat. Volume today was over 2Billion shares traded. That's the highest volume since May 2010.

We've seen three major reversal days up out of the past four. There's still plenty of supply coming on to the market but it's being hoovered up. That's a scenario setting up for a major short squeeze. Reaction upwards is likely to be quite dramatic.

But - nothing's for sure until we get some follow through buying. The previous two reversal days haven't met that criterion - and so the market was still in doubt.

A gap up opening tomorrow could make this very, very interesting.

On the negative side, Small Ordinaries were still down -0.5%. That's not a good sign for risk appetite. But that could spin around quite quickly. That negative view is supported by the Advance/Decline Ratio at 0.76:1. That's still on the bearish side of the ledger. AdvancingVolume/Declining Volume registered 0.73:1. Given the flat finish on the general market, that's not an optimistic figure on the Volume ratio.

The Relative Strength Index has registered below 30 on the past four days. That's an extreme oversold condition. I'd expect some sort of rebound on those figures. But - it's also a bear market reading. So, in the short term it may (paradoxically) be positive, in the medium term it suggests that this market is under extreme negative influences. That can change. But I'd still like to see the Stochastic on the Weekly chart hit oversold before becoming confident about a sustainable rebound.

Australian Dollar: Morning 17/3/2011

I don't pretend to be a forex trader. I watch the Ozzie Dollar closely because strength in it is needed for support of the Australian stock market. The key word is liquidity. Our market can't be bouyant if liquidity is absent. A major factor in liquidity in Australia is the inflow of overseas money to our country; i.e., the exchange rate reflects that.

Last night the Ozzie Dollar took a thumping (-1.46%) - but it still lies within the trading range in existence since December 2010. A break below support on the Oz Dollar chart would be another negative for our market.

Good luck

Red

Morning Market Review 17/3/2011

First, some raw stats.

America:

• Dow Industrials: -2.04%
• Dow Transports: -1.39%
• Russell 2000: -1.19%
• SP500: -1.95%
• Nasdaq100: -2.51%

Europe:

• London: -1.7%
• France: -2.23%
• Germany -2.01%.

The main indices in America (Dow Industrials, SP500, Nasdaq) began to show real fear last night, accelerating to the downside on increasing volumes.

On the Dow Industrials, a major support level lies at 11440. The Index finished last night at 11603. Another 150 point drop would put it close.

The VXX (ETF for the VIX, Fear Index) accelerated to the upside and reached resistance. The VIX operates inversely to the general market. UP is bad for the general market. It still hasn't shown extreme levels yet - up around the 50 level. It may need to reach those levels before a halt to this decline occurs.

On the positive side - the small caps (Russell 2000) is behaving somewhat better than the broad market (SP500) and the big caps (Dow Industrials). Just keep that in perspective - it is still recording negative values. So relative outperformance is just a small comfort.

My suggestion recently about the Australian market needing to show Oversold readings on the Weekly Charts also applies to the American market. We're not there yet. The Stochastic on a Weekly Chart of the Dow Industrials is currently reading at 57.7 - still well above an oversold reading below 20. (The Stochastic ranges in a scale from 0-100.)

All of that adds up to some hope of a relief rally, but I think that's all it will be. A proverbial dead-cat bounce. I think there's so much downward momentum now that we need to see some extreme oversold readings before the market will call it a day on this correction.

Just an aside - I haven't read anybody calling for a dead-cat bounce (except me). That probably means that the likelihood of one occurring is extremely high. :) That's got nothing to do with an overly inflated notion of my predictive powers - just the old contrarian in me coming out.

Good luck

Red

Market Comments 16/3/2011

Today the All Ordinaries (XAO) was up 0.74%. The Fifty Leaders was up 0.46%. The Small Ordinaries was up 2.02%. Volume came in at almost 2billion shares traded. That's the highest volume we've seen since May 2010.

The general market stopped right at the first level of resistance. Volume tells us that there's plenty of supply coming into the market, but the appetite for risk is rising.

A counter-trend rally is in the making. But it could be the proverbial "dead-cat bounce".

I'm still haunted by the drop back in April/May 2010 - and this is looking remarkably similar. Back then the market moved in three distinct phases. Down, up then down again. I showed yesterday that the weekly Slow Stochastic still hasn't got down to oversold levels although the daily chart has. That suggests that another leg down is likely before we can see any meaningful resumption of an upward trend.

I'd be looking at laying off stock as this retracement occurs.

Good luck

Red

Dow Industrials -1.15%. Dow Transports -0.67%.

Europe. London -1.38%, France -2.51%. Germany -3.19%.

Looking at the chart of the S&P500 in America, we now have two long-legged dojis in a row. Last night's much bigger than the previous one.

We may have seen capitulation and then recovery last night. Volume was the highest since this drop started back on 22/23 February.

Major support and resistance levels are clear on the chart 1280/1330.

Yesterday morning I "guessed" that the market could be "flat" - after saying I didn't have a clue. Well, for the first hour that guess looked prescient - then all hell broke loose. The market now seems to be governed by events at the nuclear reactor site in North-East Japan. Eventually the fear being created by those events will subside and some sense of normalcy will return to the market.

Today? Probably a knee jerk reaction down - then a slow climb back up. But check the intra-day chart I posted yesterday. Until we see a clear reversal into positive territory of the indicators, this market, for the likes of me, is something to stay away from.

Good luck

Red

Economic Effects on Japan of Current Disaster - A Reading List. 16/3/2011

So - what effects will the current disaster have on Japan - and other economies and personal finances?

Here's a brief reading list:

http://www.econbrowser.com/archives/2011/03/guest_contribut_8.html

http://krugman.blogs.nytimes.com/2011/03/15/meltdown-macroeconomics/

http://moneywatch.bnet.com/economic-news/blog/daily-money/how-japans-disaster-could-impact-your-investments/2269/?tag=content;col1

http://moneywatch.bnet.com/economic-news/blog/daily-money/how-japans-disaster-could-impact-your-investments/2269/?tag=content;col1

http://www.bostonwealth.net/2011/03/15/order-from-chaos-2/

As a quick summation, firstly on the macro-economic level, here's a comment by a Societe Generale economist:

... the impact on export infrastructure and industrial production will hit Japan's gross domestic product in the second and third quarters, while a burst of reconstruction activity will generate growth by the fourth quarter.

"Natural disasters are immediately negative for growth, but tend to be positive over the medium term," said Glenn Maguire, Asia-Pacific chief economist for Société Générale.

On a personal investment strategy, here's Barry Ritholtz's own strategy (15 March, 1.00 pm):

Today, we covered all of the short exposure

Our current posture is: 25% long, and 75% cash.

Before we make any large asset allocation moves, we will wait for the dust to settle and the picture to clarify.

The last item on the reading list has specific mention of the impact on Australia. Given that it is written from America, there may be some objectivity in the assessment.

Good luck

Red

Intra-Day Chart 15/3/2011

Above is a 5-Day Chart of the XAO with 15-Minute Intervals.

The chart has been unable to crawl back above the 50-Period Moving Average. It almost made it late on Monday and early on Tuesday. But then fell away again. That's now the "hill" the chart must climb over before it can start to make it to the upside again.

The weakness of the market was confirmed by the MACD which was unable to climb above the Zero line. Almost - but didn't quite make it.

When those two criteria are fulfilled - the market might see a bit of upside. And the swing traders will be back in action.

I think the psychology of this market has now changed from "buy the dips" to "sell the rallies".

Good luck

Red

Gold ETF Tuesday Evening 15/3/2011

Gold in Oz Dollars tends to trend inversely to the general Australian stock market, and can be used as a hedge against falls in the general market.

The Gold ETF traded on the Australian Stock Market tracks the price of Gold in Oz Dollars. It remains above the 13-Day Moving Average. It hasn't made a new high in the past three days, the last one being last Thursday.

The Stochastic has dropped below the overbought level of 80, suggesting that the next move would be down rather than up.

That's a good sign for the general market - but I wouldn't be betting on it.

Until a break occurs below the 13-Day Moving Average and the 136.25 support level (dashed line), the trend remains up.

Good luck

Red

Market Comments 15/3/2011

I'm sure I don't need to tell you that today was a savage day on the Australian market. The All Ordinaries (XAO) down -2.13%. Breadth figures were bad. On the 50 Leaders, 49 stocks were down and one was flat. None were up. Some of the breadth figures that I collect privately are the worst since I started collecting data two years ago at the end of the Global Financial Crisis. The Small Ordinaries were down -3.5%. The punters were running for the hills.

So - that's one day.

We need to get some perspective on this. I've put up a weekly chart which provides such a perspective.

We've currently traversed 50% of the down trend which occurred back in April-May 2010 when the market was gripped by fears of a double-dip recession and the May "Flash Crash" on the American market.

That 50% retracement aligns with strong support set up in August and October 2010.

This is a likely place for a pause. But given that we have a recent historical precedent for double the current retracement, don't count on it stopping here. A pause is likely. That's about all we count on say at this stage.

The market is now clearly oversold - on a daily chart (see above). The Relative Strength is at about 20 about where it got to back in phase 1 of the three phase fall back in April/May 2010. Below 30 on a broad index like the XAO is most unusual.

Looking at the daily chart we can see that the current fall is about equal to Phase 3 in the Three Phase fall which occurred in April-May 2010.

We're still not oversold yet on a weekly chart. The Stochastic on the weekly chart is at 31.6. We may need to get down below 20 before we can be sure of an end to this carnage. And even then, it might take some time for the market to return to a long term bullish stance.

For the moment - can it get any worse? Of course it can. But, in the short term - unlikely.

Good luck

Red

Market Comments 14/3/2011

Today was a "gimme" for the day-traders. And probably for the swing traders - those people trading on a two-six day time frame.

I'm not so sure about the rest of us.

Certainly we had a "reversal" candle today. Remember on Friday I said to look for a "long-legged doji" to indicate a reversal. That's what we got today.

I thought that recent activity would be a simple ABC correction to wear off the insane overbought condition of the market. But recent action looks much more than that. The past week the drive down has been unrelenting and impulsive. The sort of action which occurs at major market turning points.

So today - we had a reversal candle. We now wait for confirmation. A strong up day. How long will it last? Probably long enough for the swing traders to make a profit. But it might be a good idea for others (long term investors) to think about lightening up positions if we get a few good up days.

If you look at the weekly chart - you'll see my concerns.

If you're a fundamentalist - then you'd have to be concerned about the impact on world growth of the devastating earthquake in Japan. Such events produce winners and losers on the stock market. But the net effect is a loss maker.

To assist the disaster relief for Japan go to:

http://www.redcross.org.au/japan2011.htm

Good luck

Red

Weekend Summary and Conclusion Week Ending 11/3/2011

TRENDS:

- XJO: monthly chart - Still above the 10-Month MA. Positive.

- XJO: weekly chart - down. RSI reached usual oversold level in a bull market.

- XJO: daily chart - down. Oversold. RSI below 30 - oversold.

- Dow Industrials: medium-term - sideways

- Dow Industrials: short-term - sideways.

- Small Ordinaries: daily chart - down. Oversold.

- Ozzie Dollar: Medium term. Sideways consolidation. No significant reaction to Middle East instability.

- Gold in Oz Dollars: Medium-term trend - up. May be turning down. If so - positive for general market.

XJO currently at 4645.

Major Support and Resistance for XJO: Resistance: 5000; Support 4200 . Mid-point 4600.

Copper and Commodities in the short term have turned down.

XJO Long-term Chart Pattern: Rising bearish wedge. Broken to the downside. Bearish.

Any correction is likely to be muted because of Bernanke’s money supply (QE2) and the strength of the Presidential Cycle in the 3rd Year. QE2 effect seems to be fading.

Next Week: Geo-political events (oil price) will continue to dominate sentiment. Oil Price currently falling below 100.

The Game Plan:

- Seasonality favours further upside in March.

- The long-term “overbought” conditions which prevailed in February have been eased.

- Short-term the market is oversold.

- Market is at a cross-roads. Technicals favour a short-term bounce. Direction after that is uncertain.

If escalation of Middle East turmoil occurs, it will raise oil price and scuttle the longer term trend. Be flexible.

Watch energy and steel companies for possible positive price reactions to events in Japan (rebuilding and switching out of nuclear).

Long term Trend as at 11/3/2011

This chart of the XJO (ASX200) needs no explanation. If we break that long term up trend line that's held for nearly two years - kerplonk. :(

Good luck

Red

Morning Review 12/3/2011 (Saturday Morning)

QUICK REVIEW

Dow Industrials up 0.5% and the S&P500 up 0.71%.

Europe. London -0.26%. France -0.89%. Germany -1.16%.

Gold (U.S. Dollars): +0.4%

West Texas Oil: -1.75%

Ozzie Dollar: +1.42% (supportive of the Australian stock market)

American Bank Index: +0.96% (at 52.55 and holding above the key 52 level)

NOTES ON THE AMERICAN CHART

The Dow Industrials remains in a trading range; very rough figures: 1200-12250. Until that breaks decisively one way or the other, the market remains in limbo. Early in trade the Dow Industrials looked like breaking downwards from the range, but it recovered to finish up moderately.

WORLD EVENTS

World events were the focus of attention last night. The Saudi "Day of Rage" was a fizzer.

Read Al Jazeera's report:

http://english.aljazeera.net/news/middleeast/2011/03/2011311141047609595.html

The biggest news was the earthquake in Japan:

http://english.aljazeera.net/news/asia-pacific/2011/03/2011311607470826.html

http://www.marketwatch.com/story/powerful-earthquake-shakes-japan-2011-03-11

What will this mean for investments? I don't profess being able to predict such things. A lot of research will be done by a lot of people. You need to do your own. For me, I'll be watching carefully the effect on the share price of Woodside. Woodside is a major supplier of LNG to the Japanese market. Some nuclear power plants in Japan have been damaged which may see a partial switch to electricity generation using LNG - which would seem to benefit Woodside. The share price will tell the story. (Woodside is a basket of eight big blue chip stocks that I monitor on a continuing basis and trade from time to time.)

ANALYSIS - AUSTRALIAN SHARES IN AMERICA

I've included above a chart of EWA - this is an ETF based on the Australian share market traded on the New York Stock Exchange. It varies from the major Australian stock indices (XAO and XJO) because of currency variations.

On Thursday, EWA had a big gap down and set up a "double top". On Friday, a "bullish engulfing" candle developed which seems to have reversed that topping pattern.

Notice the Relative Strength Index in the bottom pane. From July 2010, every time the RSI has dropped down to the 40 level, the market has reversed upwards. That's a continuing sign of a bull market. The standard interpretation of the RSI is that 30 represents "oversold" and probably result in a retracement. In a bull market, however, that needs to be recalibrated so that 40 represents oversold.

What's the problem with that? All trends end. And eventually, a reversal off the 40 level will fail and the Index will continue on down to 30. But investing is an act of faith. So - while the trend maintains, we'll go with the trend.

Notice also that the EWA has now bounced off the very long term trend line in existence from July 2010. A break below that would be very bearish. At the moment the chart has bounced off the trend line. The RSI has bounced off 40. I'd like to see it get above the April 2010 high to be sure that this is the real deal. That's a major resistance area which needs to be overcome.

COMPARISON: DOW JONES INDUSTRIALS AND THE ALL ORDINARIES

The lower pane on the chart for the Dow Industrials provides a performance comparison of the Dow Industrials with the Australian All Ordinaries Index (XAO). While the XAO has underperformed the DJIA for many months, that under-performance has become extreme in the past few days. I can't help but wonder if this isn't at least partly due to a negative perception by the market of the Labor Government's plan to introduce a tax on carbon.

Good luck

Red

Quick Comment, Friday Evening, 11/3/2010

It's difficult to see that there's much more in this decline before a serious retracement. But it could happen.

The Z-Score which is a measure of volatility on a 25-Day basis is the worst since the 2-year bull market began. The RSI is below 30 - it rarely gets down that far before a significant retracement.

The "Repeating Ranges" shown on the XJO Index chart above (three long down arrows) suggest that the fall could go down to the significant support around the 4570 area.

Before trying to "pick the bottom" - it might be best to look for a reversal candle - one with a very long shadow like we saw in May and July 2010. Either that or a "bullish engulfing" candle, i.e., a big up day that completely engulfs the preceding big down day.

In the meantime, all eyes will be on events later tonight (our time) in Saudi Arabia which could have a profound effect on the oil price.

Just remember, the down trend so far is nothing like the one seen starting in mid-April 2010.

On that note of joy,

Good luck

Red

Market Review 11/3/2011

The American market was down heavily last night. Dow Industrial Index -1.87%. Transports -1.15%. S&P500 -1.89%. Russell2000 -2.64%. Nasdaq100 -1.65%.

Technically the market could be at support. The RSI is down around the levels seen in the November 2010 retracement. The Stochastic is showing a mild positive divergence to the Index chart.

Volume went up a little today compared to the last few days but the volume trend is down for this retracement. That's usually considered a positive.

Last night the American market fell heavily at the start and in the early afternoon looked like it would make something of a recovery. Then news arrived that Saudi police had fired on protesters Qatif. The protest was relatively small. Al Jazeera quoted several hundred people. This looks like a warning to others not to join in the "Day of Rage" planned on a large scale today (Friday).

Despite the big fall on the American market, both gold and oil also fell. Gold (in U.S. Dollars) -1.29%. West Texas Oil -1.76%.

Much of the recent falls in equities has been blamed on MENA unrest and the effect on the oil price. So - oil fell today and so did equities. What's going on?

Probably - there's more to the fall in equities than just the oil price. Economic conditions generally are not positive. German and Chinese exports have unexpectedly declined. The European debt issue is worsening with Moody's downgrading Spain. The cost of insuring Portugese and Greek debt has also risen. South Korea raised interest rates for the second time this year because of inflation fears.

So - it's not just all about oil.

Turning to the Gold ETF traded on the Australian Exchange - it could be coming to the end of this run-up judging by the three repeating ranges shown on the chart (see Arrows on the chart). If it is coming to the end of this run, then the general market might also be coming to the end of its falls. That's a bit speculative - but it often works. We shall see.

Good luck

Red

We're down to the pointy end 10/3/2011

We're now in a "fat-tail" event. For those not versed in statistics - it just means we're in a highly unusual situation.

For the statistically minded, the XAO is now 2.9 Standard Deviations below the norm in this fall based on a 25-Day sample. 3 SDs is unusual.

What does this mean? Maybe something - maybe a lot. There's no reason why the market couldn't have a 4SD fall or a 7SD fall. But, it put it mildly, that would be highly unusual. :)

The Relative Strength Index is now at a level last seen July 2010. And that started the current bull market after the sell-off in April 2010.

Many would be saying: "Sell everything. Head for the hills."

Maybe. Maybe they're right.

Today's action, with volume extremely high, looks like "get me out at any price" action.

That doesn't mean this is the bottom. But it's not far awary. Just my humble opinion. (And the market doesn't give a fig for my humble opinion.)

I'll be looking for a clear reversal to the upside sometime in the near future.

Good luck

Red

Morning Review 10/3/2011

I might have been a bit presumptuous yesterday unloading guilt for the fall in yesterday's stock market on the Oz Government.

Europe was generally down. So our market, as it often does, pre-empts moves in later trading overseas. But the two other big Asian markets (Hong Kong and Tokyo) also usually sense the foreboding in the West.

Anyway. London -0.63%, Germany -0.46%, France -0.55%.

U.S. markets were generally flat. The S&P500 is showing indecision with two "inside" bars in a row. (See chart above.) Dow Industrials -0.01%, Dow Transports 0.0%, SP500 -0.14%. Russell 2000 was down -0.42% and the Nasdaq100 -0.64%.

The big news for the Australian market was weakness in the base metals markets:

Copper -2.68%

Nickel -2.67%

Aluminium -0.98%

Zinc -3.82%

Lead -3.73%

It's difficult to see our Materials Index making headway with those numbers. And that will probably pull the general market down.

Good luck

Red

The One Finger Salute 9/3/2011

Last night - Dow Industrial Index up +1.03%

Today

• Hang Seng (Hong Kong) up +0.42%
• Nikkei (Tokyo) up +0.61%
• XAO (Australia) down -0.8%.

The talking heads on TV tonight will rabbit on about consumer confidence and housing figures being bad. Yeah. XAO down -0.8%, Consumer Discretionary (the sector most impacted by such numbers) was down just -0.2%.

One of the advantages of being a blogger - I can tell it how I see it.

First, let me say, I believe that global warming is a reality and that it is being caused by human activity. And I believe that action should be taken by all developing nations and developed nations to curb the excessive use of fuels causing build-up of CO2 in the atmosphere.

Today's remarks about the clear negative action in the stock market has nothing to do with my personal beliefs.

Today's negative action on the stock market is, I believe, due to market perceptions of the action taken by the National government. It is a vote of non-confidence in this government and until it can conduct matters more appropriately, sensitively and in a consultative manner, the market will continue to react negatively.

Enough of the rant.

Today's action was negative - in the face of overwhelming positive international stock market action.

Was it decisive? Probably not.

Volume today was below the 10-Day Average. The important horizontal support level was broken marginally to the down-side. But the oblique uptrend line on the chart from early 2011 still holds.

Let's see what tomorrow brings. But - if overnight is negative - then our market is looking at a bleak future.

Good luck

Red

Morning Review 9/3/2011

Dow Industrial Index up +1.03%. S&P500 +0.89%. Dow Transport up a whopping 2.57%. Russell 2000 also positive +1.53%.

The Europeans were more in line with Australia yesterday: London +0.02%, France 0.64%, Germany 0.04%. France was the odd one out - it often leads.

The American Bank Index(+2.7%) broke above the falling wedge I mentioned yesterday. That's a healthy sign but it still has some heavy overhead resistance. We still need some follow through buying - but the size of today's move is positive.

Gold in Oz Dollars was flat -0.01% after a seesaw night. The Ozzie Dollar was also flat and remains in a sideways consolidation. This can go either way. Longer term, the Oz Dollar is in a large right-angled triangle. These normally break upwards.

West Texas Oil (-0.45%) fell a little last night but remains at an elevated price level. The oil price is currently reacting to geo-political events and affecting world stock markets. The bitty dip last night is no sign of reversal.

The market's not out of the woods yet. It's still in a trading range. A break above the upper level of that box shown on the Dow Industrial Index is needed for the bulls to be happy. The shorters would be happy for a break lower.

I mentioned in the weekend report that Uncle Bennie's boys would be active in the treasuries market this week on Tuesday, Wednesday and Thursday. That action (usually referred to as "printing money") improves liquidity in the American financial system which usually flows on to the stock market. If today's positive action was due to that as well as a dip in the oil price, then a continuation of those positive events could see this market back on the upward track.

Good luck

Red

Specific Stocks 8/3/2011

Here's a couple charts for the email clients.

While both look promising - neither, in my opinion, warrant a "buy" signal at this time.

A move up tomorrow would, however, change my view of matters.

Good luck

Red

Market Comments 8/3/2011

The XAO finished up 0.1%. Marginal.

Today the market (XAO/XJO) came close to tripping over the precipice. But, in the end, it teetered back above both the major horizontal support line and the intermediate oblique support line.

Divergences on major indicators are generally positive (Stochastic, Directional Movement and MACD Histogram). Movement above the Zero line by the Directional Movement and MACD Histogram are needed to suggest the trend has changed to the upside.

Here's an interesting statistic. The Ratio of Unchanged Stocks to the Total Stocks is, today, at 0.234. That's the highest since 12 January 2011. 12/1/2011 marked the end of a short term down trend from late December 2010 into early January 2011. Why that Ratio should be of importance beats me. But historically it seems to mark bottoms in short term down trends.

On the negative side, Small Ordinaries were down -0.5%. It would be better if that figure was positive and in consistent with the rise in the broader market.

The market is in the thrall of the geo-political events occurring in the Middle East and North Africa. It has, however, an uncanny ability to sus out future events. If the markets start rising, you can be sure that the MENA crises are reaching a resolution.

Good luck

Red

Market Comments 8/3/2011

Morning Review 8/3/2011

The Dow Industrial Index was down moderately -66%. But the broader marker was much weaker. (See grid above.) The Dow Transport Index was also weak -0.84%.

Europe was weak with a wide spread in the losses. London -0.24%, Germany -0.65%, France -1%.

Emerging markets. Yesterday Shanghai was up solidly +1.35%. Bombay -1.43%. Brazil -1.21%. Saudi Arabia +3.25% - and that was its third day up in a row. If you can work out a trend from that - you're better I am. :) Apparently the Saudis aren't worried about the call for protests on Friday, 11 March.

I've been watching the American Bank Index carefully. Support lay at 52. Last night the index fell marginally below that to finish at 51.86. The chart is in a small downsloping wedge. That's usually bullish. A break lower out of the wedge would, however, be a very bearish development.

This morning I tried to log into Al Jazeera, the English language Arab news agency operating out of Doha, and ... I couldn't log in. Just a glitch - or am I getting paranoid?

Good luck

Red

Market Comments 7/3/2011

Today knocked the nascent uptrend dead in its tracks. XAO down -1.26% while the ASX200 (XJO) was down 1.37%. The volume was relatively heavy although less than the past three days.

The Nikkei today was down -1.76%.

(For the past eight years, the Nikkei and the Australian market have had a fairly close correlation.)

Providing a glimmer of hope for the bulls - the Small Ordinaries was down -0.89%. So there's some optimism there (not much) in market breadth compared to the major market indices. A quick eyeball of the two charts above (XAO and XSO) shows that the Small Ordinaries fared better today than the XAO.

Advancing Volume/Declining Volume ratio was better again, 0.89:1. That's bearish but only slightly.

No doubt the uncertainty in the Middle East and, particularly, Libya, added to the pessimism today.

Today's action seemed to me to be a bit overdone. But if the low of four days ago gets taken out decisively - then I might have to reassess. The low of that day (4876) is right at an important support level (see dashed line). So, if that breaks, we might be seeing a waterfall down.

Good luck

Red