Market Summary
The general market (XAO) was in consolidation this week, range bound although it eked out a marginal move up of +0.35%. That’s the third week in a row the XAO has been in positive territory. Note – those figures are based on a Friday weekly close. The market this week was continuously below the bull rally high set, intra-day, on Thursday, 15 October at 4897.5. So on that basis the market was down marginally this week.
The XAO is above a rising 13-Day Exponential Moving Average. Seven out of ten SP Industry Sectors were up. For a change, Telecommunications was up. The best performer was Consumer Staples after Wesfarmers had a stellar run.
Best Three Sectors:
Consumer Staples: +2.61%
Telecommunications: +2.06%
Materials: +1.66%
Worst Three:
Financials: -0.37%
Energy: -1.63%
Information Technology: -3.47%
Risk Aversion is clear with two defensive sectors at the top of the list and Financials, previously the market leader, coming in the lowest band.
Among the sub-sectors: Property Trusts down, -0.99%; Metals and Mining, +1.91%; 50 Leaders, +0.52%; and Small Ordinaries, +0.65%. The 50 Leaders was marginally better than both the XAO but fell just behind the Small Ordinaries. Risk Aversion/Risk Inclination was evenly balanced according to these measures. Gold Miners relatively flat at +0.35%.
Volume
Volume rose above the average on Thursday and Friday with Friday being well above the 2Billion shares traded. The significance of that is still to be determined. Whether that increase in volume was renewed buying leading to further rises, or selling by strong hands into weak hands ahead of further falls, is a moot question. Judging by the falls on the American market on Friday night accompanied by rising volume, the latter option looks like the best bet. We shall see. But that hasn’t changed the technical picture to any great degree. Volumes on the Australian market were good until a few weeks ago. Recently, however, volumes have not been supportive of the recent rise in the Australian markets. But our market rose anyway. Rising markets with falling volumes are usually weak markets leading to a move down. But the American market has continued upwards for months on falling volumes. This is the conundrum of the present situation
Dr Alexander Elder has developed a more sophisticated use of the volume/price relationship. The Force Index relates the change in price to the change in volume by multiplying the change in price by the change in volume and plotting the result as a histogram. I’ve developed my own version of this, by plotting an 8-Day and 21-Day Moving Average of the histogram independently of the histogram. In interpreting this chart, the most important line is the 21-Day MA (shown in Red on the chart). When it is above Zero, the bulls are in charge, when below Zero, the market is bearish. Other factors are divergences and break of trend line when the trend has been in place for some considerable length of time. (The 8-Day Line has other uses, which I won’t go into at this time.)
See above for the 8/21 Sentiment Index.
The 21 Line has broken below its up trend line. This is bearish. A break below the Zero line would, in my opinion, be a sell signal.
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