QUICK REVIEWDow 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:
The biggest news was the earthquake in Japan:
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
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