Postprandials, Friday 6/5/2011

Today the XJO (ASX200 - chart above) finished down -0.3%.  That reverses the small rise yesterday.  

I'm a bit disappointed with the "buy-the-dips" mob today. :)  I thought they might push the index higher - but I guess the thought of a poor Jobs Report tonight in America might have deterred some of them.  But - the index did finish well up off its lows.  Another reversal day upwards.

Other major indices today:

• XTL  (Twenty Leaders) -0.3%
• XFL (Fifty Leaders) -0.2%
• XFJ (Financials) +0.4%
• XMJ (Materials) -1.4%
• XSO (Small Ordinaries) -0.4%

The best performing Sectors today were Consumer Discretionary +0.7%, Health +1%.  

Technical Comment on the ASX200 Market:

1. The Index is below 50-Day MA and the 13-Day MA.  Negative.
2. Indicators:
• Slow Stochastic 11.7 and rising.  Oversold.
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI below its mid-line, now 40.5.  This is an area where a reversal can be expected - but needs to rise above 50 to prove itself.  On the other hand it could easily go lower.
• MACD Histogram below Zero.  Negative. 
• MACD below the Zero line.  Negative 
• CCI -146.21 and rising.  it needs to rise above -100 for a buy signal.
3. Volume was high and increasing - a positive on a reversal day.

In the 50-Leaders the ratio for Advancers and Decliners was 1.35:1 - mildly bullish.  The A/D Ratio for the general market was 0.88:1 - mildly bearish.  I'd prefer those to be reversed to have confidence in the background buying.

The retail investors have become conditioned to "buy the dips".  They may be right.

But there are a number of tell-tale signs that the market is reverting to a medium term bearish trend.  The Small Ordinaries, while strong recently, have generally been under-performing  the 50-Leaders.  That's a tell-tale sign.  The Telecommunications sector which has been one of the worst performing sectors over the past year, seems to be gaining strength relative to the general market.

Yesterday strength was located in the Materials and Energy sectors.  Today that was reversed.  Leadership is switching from sector to sector.  A combination of factors will either see this market swing up or down.  

Formidable resistance lies overhead.  

Today was promising.  And the probabilities have swung to the upside for now.  But tonight's action in America seems to be the key.

We shall see.

Good luck

Red