Postprandials, Wednesday 4/5/2011

Today the ASX finished down -0.93%.  It is now well below the 50-day Moving Average.   Volume today was heavier again - but has not yet reached panic proportions.  

Other major indices today:

• XTL  (Twenty Leaders) -1%
• XFL (Fifty Leaders) -1%
• XFJ (Financials) -1.5%
• XMJ (Materials) -0.7%
• XSO (Small Ordinaries) -0.5%

The best performing Sectors today were Telecommunications +1% and Utilities +0.6%, both are defensive sectors.  

Technical Comment on the ASX200 Market:

1. The Index is below 50-Day MA and the 13-Day MA.  Negative.
2. Indicators:
• Slow Stochastic 13.9 and falling.  Oversold.
• The 13-Day MA is above the 50-Day MA.  Positive
• RSI below its mid-line, now 39.7.  If you're short, this is now into the caution zone (30-40).
• MACD Histogram below Zero.  Negative. 
• MACD at the Zero line.  Neutral 
• CCI -195 and falling.  We can expect reversals if this indicator gets below -200.
3. Volume was high and increasing but not indicative of panic selling.

In the 50-Leaders the ratio for Advancers and Decliners was 0.3:1 - bearish.  The A/D Ratio for the general market was 0.6:1 - bearish. 

There were things to like about today's action.  On a heavy down day on heavy volume, I always wonder if there's buying going on behind the selling.  Smart money.  There are indications today that this is so.  The Small Ordinaries performed much better than the 20-Leaders and the 50-Leaders.  And the A/D Ration on the 50-Leaders was much worse than the general market.  So there is evidence there of buying going on.  Enough to turn this market around?  Maybe in the short term, but I still think we'll see a test of today's low before swinging higher significantly.  There's still no positive divergence on the major indicators (RSI, CCI, Stochastic.)

The other big problem is the American market.  It still looks like a topping pattern.  Can Australia swing higher if the American market falls.  I doubt it.  But that is hypothetical at this stage.  America could go on with the job - in which case the Australian market would have a good chance of reversing to the upside.

Let's see how tomorrow pans out.  If we get a strong up day tomorrow on reasonable volume, then I think this retracement is over.  If America falls heavily tonight, then we're probably going down to the 4700 area.

Good luck

Red

The Index has now broken below the dual support (horizontal and the 50-Day MA) but the break so far is marginal.  

Today's action may have been more positive than it looked.  The range today was within the range of yesterday.  The last hour saw some solid buying - often indicative of institutional activity.  It's hard to see, however, that our market could make much headway if America falls.  And the American market is currently overbought.  But - you never never know.  

I'd still like to see some positive action before coming back into this market.  In particular, I'd like to see a positive divergence on the RSI and Stochastic as a precursor to a return to the upside.