Morning Coffee, Saturday, 30 April, 2011

In America:

1. Dow Industrials +0.37% 
2. Dow Transports +0.09%
3. SP500 +0.23%
4. Russell 2000 +0.43%
5. Nasdaq100 -0.24%

Comment: Mixed market with modest strength in the Dow but the Nasdaq showed some weakness.  The Materials Sector +0.39% and Energy Sector +1.49% were both up.   That's a plus for Australia.  The Banking Sector lost -0.23%.  Semi-conductors was up +0.45%.  

Europe:

1. France +0.05%
2. Germany +0.52%
3. London - market closed for That Wedding

EWA (Australian Shares ETF traded on the New York Stock Exchange) -0.28%, The Australian Dollar was up +0.42% to finish at 109.72 - knocking on the door of 110.   That's another positive for our market - although the strength in the Ozzie Dollar has not had a positive effect on our market during the past couple of days.

Technical Comment on the Dow Industrials:

1. The Dow Industrials finished at 12810.9.
2. The Index is above both the 13-Day the 50-Day MAs.  Positive.
3. Indicators:
• Slow Stochastic 97.4.  Overbought
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 72.7.  Now out of the caution zone (60-70) and into the danger zone (above 70).  Overbought
• MACD Histogram above Zero.  Positive.  
• CCI +211.5 and dropping.  Overbought (above 200).  A dropping CCI while the market is rising is often an early warning sign of a coming fall in the market.
4. Volume was up - hugely - on a narrow bar.  Looks like a battle between bulls and bears and often a sign of a coming turn.  Interestingly, volume on the SPY (ETF tracing stock for the S&P500) was down for the third day in a row.  Lower demand.
5. Four consecutive closes clearly outside the Bollinger bands.  That's very overbought. 

In the past 24-Hours Gold in Ozzie Dollars was up 1.58% - despite having to struggle against the subduing effect of  the strong Ozzie Dollar.

And the price of oil remains high - now at 114 for West Texas.  How much longer can the price of oil continue rising without impacting broader economic concerns in America and their stock market?  As long as Uncle Bennie keeps flying his helicopter?

The American market is now even more overbought.  My opinion:  this is not a time for entering the market. 

Good luck

Lance

Postprandials, Friday 29/4/2011

Today the ASX finished down -1.02%.  It remains just above a significant horizontal support level and the 50-day Moving Average.   Volume today was very heavy - the heaviest since mid-March. 

Other major indices today:

• XTL  (Twenty Leaders) -1%
• XFL (Fifty Leaders) -0.9%
• XFJ (Financials) -0.5%
• XMJ (Materials) -1.5%
• XSO (Small Ordinaries) -1.5%

The best performing Sector today was Telecommunications +0.7%.  That's the second day in a row that the Telecoms have been relatively strong.  It's one of the key sectors I've been watching for a market turn signal.  More on that at the weekend

Technical Comment on the ASX200 Market:

1. The Index is above 50-Day MA but below the 13-Day MA.  Neutral.
2. Indicators:
• Slow Stochastic 36.1 and below its signal line.  Negative
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI below its mid-line, now 48.  Negative
• MACD Histogram below Zero.  Negative.  
• CCI -98 and falling.  Negative.
3. Volume was extremely high.

In the 50-Leaders the ratio for Advancers and Decliners was .29:1 very bearish.  This market was held up by a relatively small number of shares today.  That's another negative - a big one.

It seems that the Australian market has dislocated from the American market.  Or maybe it is just the canary in the coal mine.  It's hard to imagine that Australia would go up strongly if the American market falls - and it is extremely overbought at the moment - so falls are probable.

A break below the dual support (horizontal and the 50-Day MA) would be bearish and set up a retracement scenario with a lower high and a lower low.  Given the way volume has been increasing the past three days - I think that's the most likely outcome.

Good luck

Red

Morning Coffee, Friday, 30 April, 2011

In America:

1. Dow Industrials +0.57% 
2. Dow Transports +1.18%
3. SP500 +0.36%
4. Russell 2000 +0.38%
5. Nasdaq100 -0.15%

Comment: Mixed market with strength generally across the board but the Nasdaw showed some weakness.  The Materials Sector -0.02% and Energy Sector -0.01% were both down marginally. was up +0.32%.  That's a plus for Australia.  The Banking Sector was up moderately +0.49%.  Semi-conductors was down -0.69%.  hmmmm. 

Europe:

1. France +0.91%
2. Germany +0.95%
3. London +0.03%

EWA (Australian Shares ETF traded on the New York Stock Exchange) +0.25%, The Australian Dollar was up +0.52% to finish at 109.26.   That's another positive for our market - although the strength in the Ozzie Dollar has had any effect on our market during the past couple of days.

Technical Comment on the Dow Industrials:

1. The Dow Industrials finished at 12763.9
2. The Index is above both the 13-Day the 50-Day MAs.  Positive.
3. Indicators:
• Slow Stochastic 97.3.  Overbought
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 71.3.  Now out of the caution zone (60-70) and into the danger zone (above 70).  Overbought
• MACD Histogram above Zero.  Positive.  
• CCI +238.5 and flat.  Above 200.  Overbought.
4. Volume was down for the second day in a row.  Demand is slowing.  The trend in volume since the market bottomed in mid-April has been steadily down.  That's not a good sign.
5. Three consecutive closes clearly outside the Bollinger bands.  That sets the market up for a short term consolidation or retracement.

In the past 24-Hours Gold in Ozzie Dollars was down -0.17%.  Its price was subdued by the strong Ozzie Dollar.

And the price of oil remains high - now above 113 for West Texas.  How much longer can the price of oil continue rising without impacting broader economic concerns in America and their stock market?  As long as Uncle Bennie keeps flying his helicopter?

The American market is now more overbought.  My opinion:  this is not a time for entering the market. 

Good luck

Lance

Postprandials, Thursday 28/4/2011

Today the ASX finished flat, up just 0.132 of a point.  It remains just under a significant horizontal support/resistance level and the 13-Day Moving Average.  Yesterday, the market hit a major horizontal resistance level and fell all day.  That's where the market finished today - after being up strongly in the early part of trade.  Today's candle is a "gravestone" candle inside the range of yesterday.

Other major indices today:

• XTL  (Twenty Leaders) +0.2%
• XFL (Fifty Leaders) +0.1%
• XFJ (Financials) +0.4%
• XMJ (Materials) -0.5%
• XSO (Small Ordinaries) -0.4%

The best performing Sector today was Information Technology +5.3%.  Information Technology is a very small sector and a major change in one component can affect the Index strongly.  Computer Share rose over 7% today after announcing the acquisition of an American company.

Amongst other sectors the standout was the Telecoms sector +1.6%.  (At the weekend for another forum I focussed on the out-performance of the Telecoms as a possible indicator of a turning market.)

Technical Comment on the ASX200 Market:

1. The Index is above 50-Day MA but below the 13-Day MA.  Neutral.
2. Indicators:
• Slow Stochastic 52.2 and above its signal line.  Positive
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 53.7.  Positive
• MACD Histogram below Zero.  Negative.  
• CCI +18.9 and falling.  Negative.
3. Volume was higher than yesterday in the All Ordinaries and the highest in the past seven days.  Given that today was an "upthrust" day which finished on its lows, that's a negative.

Today was Options Expiry day.  It's possible that the past two days (out of sync with movements in America) were part of OE shenanigans.  Possible.  The American market is, however, overbought and looking likely to consolidate or retrace.  So the Australian market may be anticipating that action.  Given that today was an inside day (sometimes considered a day of indecision), we might still have to wait on another day before coming to an opinion about likely direction.  But, at the moment, in my opinion, the odds are stacking up on the down side.

Finally - the 50 Leaders was up marginally today.  The tally for Advancers and Decliners was 15/32 with three flat.  This market was held up by a relatively small number of shares today.  That's another negative - a big one.

Cheers

Red

Morning Coffee, Thursday, 28 April, 2011

In America:

1. Dow Industrials +0.76% 
2. Dow Transports +0.87%
3. SP500 +0.62%
4. Russell 2000 +0.62%
5. Nasdaq100 +0.73%

Comment: Momentum continued upwards.  Uncle Bennie didn't bring any showers on the post-Easter parade.  The Materials Sector was up +0.32%.  That's a plus for Australia.  The Banking Sector was strong +0.96%.  Semi-conductors was flat +0.04%.  hmmmm. 

Europe:

1. France +0.55%
2. Germany +0.66%
3. London -0.02%

EWA (Australian Shares ETF traded on the New York Stock Exchange) +0.21%, The Australian Dollar was up +0.9% to finish at 108.74.   That's another positive for our market.

Technical Comment on the American Market:

1. The Dow Industrials finished at 12691
2. The Index is above both the 13-Day the 50-Day MAs.  Positive.
3. Indicators:
• Slow Stochastic 96.3.  Overbought
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 69.1.  At the top of the caution zone (60-70)
• MACD Histogram above Zero.  Positive.  
• CCI +241.7 and rising.  Above 200.  Overbought.
4. Volume was less than yesterday.  The trend in volume since the market bottomed in mid-April has been steadily down.  That's not a good sign.
5. Two consecutive closes clearly outside the Bollinger bands.  That sets the market up for a short term consolidation or retracement.

In the past 24-Hours Gold in Ozzie Dollars was up +0.97%.  That increase in the Ozgold price was due to a huge rise in U.S.Gold - not a falling Australian Dollar.  So that can be discounted as a negative for the broad Australian market.

And the price of oil remains high - now above 113 for West Texas.  How much longer can the price of oil continue rising without impacting broader economic concerns in America and their stock market?  As long as Uncle Bennie keeps flying his helicopter?

The American market is clearly overbought.  My opinion:  this is not a time for entering the market. 

Good luck

Red

Postprandials, Wednesday 27/4/2011

The ASX200 (XJO) was down -0.83% to finish at 4872.9
Volume was the highest of the past six days.  That's a concern.

The Small Ordinaries was down more than the general market: -1.3%%.    The Advance/Decline Ratio was weak 0.61:1.  

Today the market broke back below an important oblique uptrend line and below the 13-Day Moving Average.  That's a negative - but not terminal.  

Technical comments today:

• MACD Histogram remains marginally below the Zero line.
• RSI - 53.6.  Positive
• Stochastic (49.7) and above its signal line. Positive
• CCi  finished at 36.1.  Positive

Today's market was a surprise drop to the down side given that overseas markets had risen during our well earned rest.  And there's not much to like about today's action.

Let's see how tomorrow pans out.  A down day would be very bearish.

Cheers

Redb

Morning Coffee, Wednesday, 27 April, 2011

In America:

1. Dow Industrials +0.93% 
2. Dow Transports +1.85%
3. SP500 +0.9%
4. Russell 2000 +1.04%
5. Nasdaq100 +0.52%

Comment: Momentum picked up again today.  Results were general strong across the board with the techs just a little weaker than the others on a relative basis.  The Materials Sector was up +1.22%.  That's a plus for Australia.  The Banking Sector was strong +0.85%.  Semi-conductors was very strong +1.59%.  

Europe:

1. France +0.58%
2. Germany +0.84%
3. London +0.85%

EWA (Australian Shares ETF traded on the New York Stock Exchange) +0.53%, The Australian Dollar was up +0.55% to finish at 107.77.  

Technical Comment on the American Market:

1. The Dow Industrials finished at 12595.4
2. The Index is above both the 13-Day the 50-Day MAs.  Positive.
3. Indicators:
• Slow Stochastic 96.7.  Overbought
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 65.8.  In the caution zone (60-70)
• MACD Histogram above Zero.  Positive.  
• CCI +188.8 and rising.  Getting close to 200.  Caution.
4. Volume was improved over the previous two days - demand is good.  (Light volume the previous two days was probably an Easter effect.)

In the past 24-Hours Gold in Ozzie Dollars was down -0.52%.  That's a positive for our broad market.  

And the price of oil remains high - hovering above 110 for West Texas.

Yesterday I mentioned the danger signal being flashed by the VIX:VXV Ratio. 

Here's another one that I watch - the ratio of the Commodities to Bonds.  While Commodities outperform Bonds the stock market tends to rise.  And vice-versa.  This ratio tends to be a leading indicator.  Here's a weekly chart for the Ratio:

It needs to break below the dotted line to confirm a bearish move.

Here's another indicator of the health of the American economy - the Ratio of Coincident to Lagging Indicators:

You can see that this Ratio bottomed about the same time as the stock market bottomed at the end of the GFC.  That's a worrisome dip from the beginning of 2011.

Today should be up on the Australian market.  If it falls later in the day - that's probably a leading indicator for the overseas markets tonight.

Cheers

Red

Morning Coffee, Tuesday, 26 April, 2011

In America:

1. Dow Industrials -0.21% 
2. Dow Transports +0.19%
3. SP500 -0.16%
4. Russell 2000 -0.17%
5. Nasdaq100 +0.27%

Comment: Momentum continued to slow in a dull trading session.  Results were mixed.  The Materials Sector was down -0.77%.  That's a minus for Australia.  The Banking Sector was flat +0.02%.  Semi-conductors was flat +0.05%.  

Europe - closed for Easter Monday.  Previous session results were:

1. France +0.43%
2. Germany +0.64%
3. London -0.07%

EWA (Australian Shares ETF traded on the New York Stock Exchange) +0.11%, The Australian Dollar was down -0.26% to finish at 107.22.  

Technical Comment on the American Market:

1. The Dow Industrials finished at 12479.9
2. The Index is above both the 13-Day the 50-Day MAs.  Positive.
3. Indicators:
• Slow Stochastic 95.9.  Overbought
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI above its mid-line, now 61.2.  In the caution zone (60-70)
• MACD Histogram above Zero.  Positive.  
• CCI +130.52 and dropping.  Caution.
4. Volume was lower than the previous two days - demand is easing.  (This may be an Easter effect - or may be more significant.)

In the past 24-Hours Gold in Ozzie Dollars was flat -0.11%.  That's a positive for our broad market.  

And the price of oil remains high - hovering above 110 for West Texas.

Recently I commented on how low the VIX Index had fallen - and that complacency was too high.  There's an excellent blog called VIX and More.  The writer goes into the complexity of the VIX to much greater degrees than I can hope to do.  He's noted that when the VIX:VXV Ratio is below 0.9, the market tends to fall.  That ratio is currently around 0.8.  Draw your own conclusions.  (VIX relates to 30 Day Volatility, VXV relates to 3-month volatility.)

The Australian market is closed today, so we have to wait on another day of overseas trading before we can take any action.

Good luck

Red

Weekend Summary and Conclusion Week Ending 21/4/2011

TRENDS:

- XJO: monthly chart - UP.   Still above the 10-Month MA.  Positive.  In a very long term sideways

consolidation.  (The one chart IMO the long-term investor needs to look at.)

- XJO:  weekly chart - UP.  Above 13-Week MA.  Stochastic at overbought. Caution. 

- XJO:  daily chart - up.  Light volume puts question mark over the current rally.

- SP500:  medium-term and short-term - Up.

- Nasdaq:  short-term - up.  Overbought - caution.

- Small Ordinaries: Relatively weak compared to ASX200.  Caution.

- Ozzie Dollar:  Multi-year highs.  Stochastic and CCI dropping - caution

- Gold in Oz Dollars:  short-term trend - down.  Indicators neutral.  On the cusp

                - Copper  - the short term trend is up in a medium term down trend channel.

XJO currently at 4913.

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

Seasonality - last week of April in the 3rd Yr of the Presidential Cycle has been neutral.  

Sentiment - Generally too bullish to sustain further advances.  But see:  http://tradersnarrative.wordpress.com/2011/04/22/sentiment-overview-week-of-april-22nd-2011/

Several disturbing and variously unrelated undercurrents:

       Relative weakness of Australian Small Ordinaries
Speculative Bubble in Silver
Medium term down trend in copper
Low volume on the Australian market
Very low reading in implied volatility (VIX) - too much complacency
Disquiet about the Australian government’s performance in areas such as resouces and carbon taxes.
Rumours beginning to circulate that the government will try to make house prices more affordable by tackling pricing pressure from property investors.  Such action would be have unexpected consequences for the banking sector and the stock market. 

           (see:  http://www.smh.com.au/national/talks-test-the-water-on-negative-gearing-change-20110420-1doxq.html)
Such a list requires mention of:  bond yields in Greece Portugal and Ireland going parabolic, Oil Price, Libya, Middle East, Japan, Nuclear fears, China’s efforts to restrain inflation, other East Asian economies’ efforts to restrain inflation, Sweden raises rates, EU raises rates, Thailand raises rates, Brazil raises rates, Standard & Poors puts U.S. credit rating on ‘negative’ status, etc., etc., plus unknown black swans.

None of the above precludes the market going higher - but together they make for a weakening context.  And that qualifies for Understatement of the Year :)

Short term the market looks like it is going higher but I’m expecting at least a short term top and possibly an intermediate term top in the next week or so.

Good luck

Red