Market Comments 31/8/2010

Today is one of those days I want to be able to offer some great insight, some sharp, pithy comment. hmmmm. That's the desire of most in the blogosphere - and came what may - the bloggers invariably do.

Weeeellllll.

Here it is .................

The market was down today. :)

And there's nothing much else to say.

The market (XAO) was down -1.0%

The 50-Leaders were down -1.1%.

The Small Ordinaries were down -1.0%.

The Advance/Decline Ratio was 0.77. That's about what you would expect on a -1.0% down day.

Today was an "inside day". So, the previous day's big rise hasn't been reversed. An inside day is usually followed by a move the next day in the direction of the short term trend - which is up.

hmmmm. Well, we'll wait on that one. If it is down - that's not a good sign.

Hang on - I do have something insightful and pithy to say. :)

The NewHighs/NewLows on the 50-Leaders was 2/0.

There - a non-confirmation of today's fall.

Tomorrow will be UP, UP, UP.

Oh YEAAAHHHHHHHH.

And I also have the Storey Bridge for sale.

Cheers

Red

Market Comments 30/8/2010

A strong day today with the market (XAO) up 1.8% on average volume. Monday is often a low volume day so that looks OK.

The Advance/Decline Ratio was solid at 2.1. And UpVol/DownVol Ratio was a strong 6.4. That ratio is rarely over 5. Given the strength of the market today, we may see a day of two consolidation, that happened the last time we had such a strong figure. On other instances, however, the market kept on with the job for several days.

Whatever. That ratio appears to mark a clear short term bottom.

On the weekend, I noted that the market was sending clear signals that a short-term bottom could be in. Today's action cements that view.

The Gold ETF lost considerable ground today, down -1.33%. The uptrend line has broken to the downside and key indicators have all turned down. The weakness in the Gold ETF also supports the notion of a bottom in the stock market.

I would expect further upside.

Remember, tomorrow is the start of Spring and historically the worst month of the year.

Maybe September won't be so bad this year. Oh YEAAHHH.

Weekend Comments, week ended 27/8/2010

The XAO had a poor week this week and remains in a trading range. Plenty of evidence exists that our market and the American market may be at a short term bottom:

o Breadth on the broad Australian market
o Breadth on the 50-Leaders
o Upside break on the Ozzie Dollar
o Upside break on the Russell 2000
o Contrarian signal on the Investor Sentiment Bullish Ratio
o Topping signs on long term American Treasuries
o Positive technical signals on Copper
o Short term alerts to a positive trend change on the XAO

A break by the XAO of its down-trend line would confirm a short-term uptrend in place. A break above 4620 could suggest a medium term uptrend confirmed.

There's a lot of fear in the market regarding the month of September, which is traditionally the worst month of the year. It doesn't have to be. But it does suggest that one should keep the finger hovering over the sell button and use it on any break lower.

Watch the blog for daily updates (Monday to Thursday):
http://redbackmarketreport.blogspot.com/

Market Comments 26/8/2010

The XAO was up today, +0.75%. Solid. It was, however an "inside day", not enough to reverse yesterday's down move.

This means that the XAO found support at the 17 July low.

I think we can expect some more up movement. A test of the down trend line from early August is on the cards.

A move up above that would be bullish.

The Trin (a rarely discussed indicator in Australia) has broken below its up-trend line. The Trin reads inversely to the market. Down is good for the market. Up is bad.

Here's the formula for TRIM.

TRIN = ((Advancing issues/declining issues) / (advancing volume/declining volume))

Basically it's a sophisticated measure of breadth.

The Trin broke below its uptrend line yesterday and confirmed that with a further move down today. That's bullish for the market.

So - we now have a conflict. We have several classic indicators saying that a "sell" signal has been generated (see yesterday's blog).

Today we have a confirmed reversal signal by the Trin.

That conflict can be resolved by:

1. a short term move up and a reversal off the downtrend line. (Proving the classic signals correct).
2. Or a break of the downtrend line and proving the Trin correct.

I think the probabilities lie with Option 1.

Classic analysis has a long history of being right. Not always - but enough to give an edge.

A break below the current support level would be bearish - and a test of the July low (4200) will be a high probability.

Cheers

Red

Down she goes 25/8/2010

Today convincingly confirmed the sell signal I noted yesterday.

XAO broke well below the 4400 level on higher than average volume for the past 50 Days.

The Price Weighted On Balance Volume has broken down from its symmetrical triangle.

The A/D Line has completed a back test of resistance and yesterday broke below its uptrend line. It really needs to break below the recent low to form an M top - but one more day down would do that convincingly.

I still have a lot of analysis to do tonight, but I doubt I'll see anything to change my mind about the current situation.

Significant failures of support occurred today in the general market. A test of the July low at 4200 looks highly likely. A break below there would be serious. Given the seasonal pattern with September coming up, that looks likely.

But - on the stock market - anything can happen. Continue to watch action and significant indicators. And do your own research.

Market Comments 24/8/2010

The market's response to the federal election has so far been muted. Today was down about 1% on the XAO. That looks more like a move down in concert with the American market last night and the Japanese and Hong Kong markets today which were both down over 1%.

Looking at SHL today, one of the key stocks to be affected by a change in government, it was again up strongly today. It is now on the verge of a breakout.

TLS is the other key stock to look at. It's situation is complicated by the fact that it went ex-dividend yesterday. However, it's fall yesterday was more than can be attributed to the ex-dividend date. Today it recovered some ground. Strong stocks going ex-dividend often recover the loss ground very quickly. It's still early days - but unless a strong upmove occurs in TLS, then I think we can attribute the weakness to a perception in the market that that coalition will win out in the long run. SHL seems to be suggesting that.

The very general indicators I use gave a "sell" signal on the XAO.

• MACD below Zero
• RSI below the mid-line
• W%R below the mid-line.

These signals must have some discretionary scrutiny applied to them. Unless the stock/index also breaks below an important support level, the signal should be ignored.

The important horizontal level which must be broken is the 4400 level.

If that is broken to the downside, then I think we can expect a test of the July lows.

Most technical factors are pointing to further decline. But until 4400 is broken, I think I'll stay on the sidelines.

Cheers

Red

Post election 23/8/2010

The market (XAO) was flat today. The XAO was down 1.684 points which registered a %age fall of just -0.04%. In the larger scheme, that is F L A T.

The news that I watched tonight about financials matters focussed on the effect on the miners. While domestic matters will undoubtedly affect the miners, external factors are of greater importance.

The sectors most affected by the election are the telecoms and the health stocks. A Labor win would have been positive for Telstra and negative for large health stocks (except for CSL which is a big international company). So let's focus on those.

Telstra was down a whopping 6.86%.

Amongst the health stocks, aside from CSL, the biggest is SHL (Sonic Health Care). It was up 2.4%. Really, that was not enough to break out of a medium term sideways trend, but it is a significant upward movement.

So - who is the market betting on for an eventual win in the ensuing battle for minority government? It looks, at this stage, like a coalition win.

In the longer run, the international scene will prevail.

Cheers

Red

Post

OMG - I can't believe I did this. 19/8/2010

Yes - that's me. I'm not infallible. Ok. Ok. I know you never thought I was.

But this, this was really really stoopid.

I prattled on in my earlier blog tonight about high volume - while the market was flat.

So - what am I on about?

Today was Options Expiry Day. Volume is always higher than normal on Options Expiry Day. But your elderly chartist missed such an important and simple fact. (I could explain why I missed it - but really, it is indefensible.)

Just goes to show - do your own research. Don't believe a thing this old dodderer has to say about anything. :)

Now - back to work and some serious analysis.

Cheers

Red

Market Comments 19/8/2010

"Strasnge days indeed." (John Lennon.

The past two days on the XAO have been narrow range days on high volume. High volume is usually accompanied by high volatility. If this is a battle between bulls and bears, then it is a most unusual battle.

The XAO was again flat today up just 0.1%. The past two days have seen this indicate oscillate tightly around that old level - 4500, finishing at 4509.6. Indicators are still showing that the market is trending sideways.

The 50-Leaders registered a movement of 0.0% - flat. But the Small Ordinaries recorded 0.5%. There's no indication there that the market is in danger of falling.

The A/D Ratio was positive but unspectacular at a ratio of 1.2. The AdvancingVol/DecliningVol was more solid at 1.8. That's a good reading on a relatively flat day.

Clearly the fall in BHP over the past two days has been a dampener. It closed at 40.2 on Tuesday and today finished at 38.3.

It only takes a fall in a behemoth like BHP to skew the results on the Australian market.

Of the other two blue chips on my watch list, CSL has fallen away from the critical buy level while WOW is solidly above. CSL is now at the low of its trading range, so it could be setting up for a nice short term trade. For more conservative investors (like me), I still would like to see it break above the current trading range - the top is around 34. Today CSL closed at 31.80. That's only about a 2.00 range for CSL. It could easily meet my buy criteria in the near future.

Gold ETF is still being held at resistance. It needs to get over the 135 level if it is to make further headway.

Cheers

Red

Market Comments. 18/8/2010

The XAO remained virtually flat today. It remains within the trading range 4200/4625.

The A/D Ratio was 1.2. That's biassed to the upside. The Small Ordinaries was down -0.4% but the mid-caps was up 0.4%. Usually they are in sinc. Perhaps that balances out to a flat day?

The Energy and the Financials were both up 0.8% while the Materials were down 1.8%.

It's difficult to make a case one way or another from this data. A mish-mash, ending up even.

Let's wait to see what tomorrow brings.

Cheers

Red

BHP, CSL, WOW morning call 18/8/2010

Yesterday, Woolworths broke marginally above recent horizontal resistance. Indicators (MACD, RSI, W%R) are all positive. The 150-Day SMA lies just ahead around the 27.00. That area is also an area of solid horizontal resistance. WOW might struggle to get above that area after its recent good run. But - the trend is up.

The past three days have been indecisive ones for CSL . Friday was a long-legged doji, or rickshaw man. The balance between bulls and bears was even. Monday saw a black candle inside the range of the previous candle. Another day of indecision with the balance going slightly to the bears. Yesterday saw a small star doji inside the previous days range. That's another day of indecision. Usually such a pattern resolves clearly one way or the other to give near-term direction. Looking at the short-term hourly chart, the action has taken place well below the 65-Period SMA. It needs to clear that first before any upward momentum can be generated. CSL remains within a longterm sideways trend. It needs to get above 34.00 to break out of that trend. Short term it can go either way - and still remain within the sideways movement. Patience is required.

BHP needs to break above 40.40 and the 65-Period Moving Average on the daily chart to be a chance of establishing a new uptrend. Yesterday it closed at 40.20, not far away. And BHP can move very quickly, so a strong day today should see further upward movement by BHP.

Remember, the above thoughts are merely the ramblings of an elderly chartist trying to make sense of a chaotic environment. Always do your own research, and professional financial advisers are available for consultation.

The Storm that hasn't formed 17/8/2010

The following is from Jeff Master's blog on Weather Underground/Tropical.

• Elsewhere in the tropics
• All of the major models continue to predict a major pattern shift in the global atmospheric circulation late this week, which leads to breakdown of the Russian heat wave and start to the Cape Verdes hurricane season. Most of the models predict a tropical storm will form off the coast of Africa late this week, and track west-northwestward across the Atlantic. As usual, it is highly uncertain what track a storm that has yet to form might take.

These are the storms which likely track across to the Gulf of Mexico. They don't have to - they can veer off to the north-west and up the Atlantic coast of America. But .. just keep in mind Katrina. I'm not suggesting that will happen again - just that the hurricane season can have serious effects.

The hurricane season for the Gulf of Mexico will soon start. Just when is another matter. Just how serious is another matter.

But these storms have a potential to disrupt oil production in the gulf and the price of oil on the global market.

It is worth keeping an eye on for the near future.

http://www.wunderground.com/tropical/

Cheers

Red

BHP as at 17/8/2010

I won't go into a long spiel about BHP. It needs to get above Friday's high at 40.41 to confirm an uptrend. Today's Slow Stochastic suggests that will happen as it has moved convincingly above its signal line.

Let's see what tomorrow brings.

Cheers

Red

Market Comments 17/8/2010

The All Ordinaries (XAO) had a solid day today, up +0.84%. The Advance/Decline Ratio was also solid at 1.7. All S&P Industry Sectors were up, with the Industrials a stand-out, +2.2%.

Risk Aversion was dominant with the Small Ordinaries up +1.5% and the Fifty Leaders +0.8%. That is also positive for the market.

The weakest sector today was Energy, +0.1%. Woodside, after a good short term run-up, hit the resistance of the 150-Day Moving Average and dropped back, dampening the overall performance of this Sector. That may or may not be an indication of future direction. Another down day tomorrow (which I doubt) would put the rally of the whole market in doubt.

Gold has had a great run recently (see prior post this morning). Today it ran into a triple whammy. Resistance at the 50-Day Moving Average, the 20-Day high and recent horizontal resistance set back in mid-July.

Today's candle was a bearish engulfing candle, occurring at significant resistance. Expect more falls in the short term.

Gold often trades inversely to the XAO. So that may be a pointer to further rises on the general market.

Cheers

Red

WOW as at 16/8/2010

Woolworths is the other stock I've been keeping a close eye on. It's consolidated in a tight range between 26.25 and 26.90. A decisive move above 26.90 would be very bullish.

I'd like to see it break above the 150-Day SMA before taking a trade, but if I'm feeling like a brave-heart I might take the plunge if it breaks above the 26.90 area.

The MACD is now positive and supported by RSI.14 and W%R above their mid-lines.

All the balls are lining up.

CSL as at 16/8/2010

Yesterday, CSL had an "inside day" - and down a little on Friday.

The MACD is sitting right on the Zero line.

The stock has been in a long sideways trend for nearly three months. You can see how the RSI.14 has been oscillating between the 40 and 60 levels, not too hot, not too cold. But "just right" is no good for the medium term investor - we want to see an up-trend develop.

These sideways movements can be trying on patience, but these are the type of periods we want to see. The longer they develop, the stronger the next move will be. Whether that is up or down can't be predicted.

A move above the 34-area by CSL would be very bullish, and should see a strong move up. Patience is required.

BHP as at 16/8/2010

BHP was down a bit on Monday after a big rise on Friday. It is now bracketed by the 13/39-DaySMAs and in a short symmetrical triangle. A break either way should decide near-term direction.

The RSI.14 has broken its up-trend line. That's not a good sign, but is still holding above the 50 Line. A break below that would be bearish.

Gold ETF as at 16/8/2010

The Gold ETF (Gold in Ozzie Dollars) has had a good run and rising exponentially.

In early August it consolidated around the 150-Day SMA and has since risen every day for the past five days.

It is now heading into heavy weather with horizontal resistance around the 133-135 area (circled).

Above that is the 65-Day SMA and the down-trend from the June high. A breakout above that would be very bullish.

Market Comments 16 /8/2010

The XAO was down today -0.35% after rebounding off its lows in the first hour of trading. That in itself is a positive.

The Advance/Decline Ratio was positive at 1.1.

The 50-Leaders was down 0.5%. The Small Ordinaries was up 0.3%. So strong optimism was present in the market.

The usual momentum indicators have not turned to the upside, so this market remains in the balance. A good night on Wall Street should provide a boost for a market - in the short term.

The Monday before Options Expiry has a good positive record, so tomorrow on our market may be positive.

Given the optimism in some sectors of our market today, tomorrow could be a strong up day. It all depends on tonight's action in America.

Long term trend - down

Medium term trend - neutral

Short term trend - neutral.

This market could easily turn upwards. In the short term.

Cheers

Red

Summary of Weekly Report

Last week and the week before I said: Prospectively, the rising wedges seen in numerous charts and the negative divergences on MACD Histograms suggest a serious market fall is coming – but the market may have more time to run up before those forces play out.

This week the bearish breaks occurred. A great deal of unanimity exists in these charts. This market can still move higher in the medium term, but the probabilities now favour the downside. A short-term movement up is likely – and is just as likely to fail. We shall see. At this stage I’m medium term bearish with the possibility of a move up this week.

As I see it, the one light on the horizon is Gold. The Gold Miners are moving into a favourable seasonal time and the trend for them is currently up.

Cheers and good luck

Red

Market Comments 12On /8/2010

Well, it doesn't take Einstein to look at this chart to see that things are crook in Tullarook.

We're close to a bounce. The Slow Stochastic is down around 0 - but, probably, any bounce, or pause, is likely to be short lived before the next leg down. With the MACD below its signal line, the probabilities lie to the down side in the not too distant future.

On the Gold ETF chart, today's candle was a "stumpy" grave-stone candle. That often suggests a retracement is on the cards. The Slow Stochastic has crossed below its signal line. A cross below 80 would suggest that, short term, this rally has finished.

Putting it together.

We're looking at a relief rally in the general market in the next day or two.

After that ............................... hmmm. Probably another leg down. We shall see.

Kaboom 11/8/2010

Today was emphatically down. -1.8%. That's now two days down from the top of an oversold range. That looks like an end-game to me. How much longer will it go down for? Just keep watching the trend . The trend is down.

The RSI crossed below 50 today. That's the boundary line between bull and bear. The MACD is close to breaking below its signal line.

I think you all know that I like the Gold ETF as a hedge against falls in the general market. A few days ago I suggested that the Gold ETF was hinting at a reversal not indicated by the general market. That hint has paid off handsomely.

The Gold ETF is now surging upwards.

Personally I'm out of the general market and investing in the Gold ETF.

A more conservative way would be to remain in the market and invest in the Gold ETF. It seems to me to be a pairs trade which should prove to be close to neutral.

The market is now at short-term support. A pause or move up would not be unexpected.

I think, however, that the market has suffered such technical damage at a key area, that further falls in the medium term can be expected. A test of the early July lows looks on the cards.

Cheers

Red

Gold: This is not an ugly chart 10/8/2010

Now, little ones, I want to continue your aesthetic education.

This is not an ugly chart. It is not a beautiful chart. But it is not ugly.

Please note.

The chart is above the 13-Day Simple Moving Average. That is not ugly. That is nice.

The MACD has crossed above its signal line. That is not ugly. That is nice.

The W%R is close to 0. That is not ugly. That is nice.

Just what would make this chart beautiful? I'm glad you asked.

1. The 13-Day Simple Moving Average would turn upwards. That would be beautiful.

2. The MACD would be above ZERO. That would be beautiful.

3. The RSI would rise above 50. That would be beautiful.

If all those things come to pass, then this chart would be beautiful.

Here endeth the lesson.

Cheers

Red

Pay Attention Little Ones 10/8/2010

Pay attention little ones. Here-in is an aesthetic analysis of the BHP chart.

Have a look at the action today. A big black candle underneath a big white candle.

The big black candle breaks below the uptrend line.

That is an ugly picture.

Do you undestand the word "ugly". Ugly is not a nice word. It is a four letter word - and four letter words are UGLY.

And this picture is UGLY.

But, little ones, it could be "uglier". Do you know how it could be "uglier"?

Well let me spell it out for you, just in case you don't know.

The MACD could cross below its signal line. That would be very ugly.

The RSI could drop below 50. That would be very ugly.

And W%R could be down at -100. That would be very ugly.

So - we do have an "ugly" picture. But it could get a lot "uglier".

Keep watching - only if you want to see a very ugly picture, coz that's what I think we're going to see. :)

Cheers

Red

Steady as she goes. 9/8/2010

The Australian market continued to make good upward progress today. The chart remains above the 13-Day Simple Moving Average and other indicators are positive.

Some evidence of risk aversion came into play today. The 50-Leaders were up 0.7% while the Small Ordinaries were up 0.6%. Not much in that - you couldn't mount a crown case on that one.

However, the Small Ordinaries tend to outperform when the Miners also outperform. The Miners were up 1.1% today - so there is some slight negative divergence there. Not enough to make a case on - but something to think about as time goes on.

The Gold ETF is looking promising. Today it closed above the 13-Day SMA. A move higher by this Moving Average would be positive. The MACD also closed above its signal line today - a big positive.

For a concerted move higher we need to see the DMI+ cross above the DMI-, it is still some way from doing that.

The Gold ETF tends to trade in an inverse relationship to the market. So, at the moment, it is hinting at future weakness in the general market - but it is by no means certain.

In the meantime - the trend of the XAO is up - until it moves down, we'll stay with our bullish assessment.

Cheers

Red

Quick Comment,4/8/2010

No detailed blog this evening and perhaps tomorrow as I'm out of town for a couple of days.

It's about 2.30 pm Wednesday. Another leg down may have begun. Still too early to be sure.

Gold ETF seems to have broken upwards confirming the weakness in the XAO.

That's all for now.

Good luck.

Red

Gold ETF 3/8/2010

The Gold ETF has been plugging resolutely sideways for the past few days.

Until it breaks out of that consolidation, there's not a lot to say.

Which way will it break?

The odds are to the upside given the very low reading on the RSI - down near the 20-level - a very oversold reading.

But ... you never, never know ....

Cheers

Red

Market Comments 3/8/2010

I'm sorry - but I'm out of bridges.

And at the moment it looks like I might have to deliver. :)

Today was very bullish. Volume was up - almost double yesterday's volume. Today +1400K, yesterday, +775K. What is going on?

Does that indicate a suckers' rally? I dunno. We can only know the answers to such things in retrospect.

I'm seeing negative divergences all over the show. Here's just one example: the Cumulative AdVol/DecVolLine is very strong. The AdVol/DecVol RSI was at an overbought level and is now showing a negative divergence from the chart. That doesn't mean that a retracement must occur - but momentum is slowing. The odds are cast against further strong upward movement.

Anyway - if you still want to buy a bridge - I've got one down in Sydney. It is well used, but has been well maintained and has many years of service left in it.

Cheers

Redb

Market Comments 3/8/2010

Market Comments 2/8/2010

One of my sources of information is not playing ball today, so this will be an abbreviated post.

Today the market was up solidly 1%. Distribution of gains was a little odd: 50-Leaders +1.1%, Small Ordinaries +1.5%, Mid-Cap 50 0.8%. I guess somebody had to be the loser (relatively) and it was the Mid-Caps.

But - how come we have a strong up day on extremely low volume? Volume today, on an up day, was just shy of 750 million. Friday, when we had a down down, the volume was over 1300 million.

Go figure! If you believe today was bullish, I've got a great bridge for sale here in Brissie.

Cheers

Red

Weekly Summary. Week ended 30/7/2010

This market has been up four weeks in a row.

Although not exactly the same, the past four weeks look a lot like the four weeks from mid-May into early June. That was followed by two weeks down – big downs. We can’t expect the same to happen – but a bit of easing can be expected. The market certainly looks extended.

Prospectively, the rising wedges seen in numerous charts and the negative divergences on MACD Histograms suggest a serious market fall is coming – but the market may have more time to run up before those forces play out.

The 50-Leaders information suggests a short term setback is coming.

Advancers/Decliners have been very strong.

All of that suggests to me that this market needs to pause for breath before another leg up. And that should bring us close to the danger month of September.

If in the next week the market moves down quickly through the uptrend line – then my prognostications will need revising. August, although usually fair-to-middling, can be a very ugly month in the U.S. - it has recorded some big down times: -9.9% in 1966, -10.4% in 1974, -12.5% in 1990 and -19% in 1998. And all of those occurred in the Second Year of the Four Year Presidential Cycle. We are now in the Second Year of the Four Year Presidential Cycle.

We must always be mindful of Mark Twain’s words:

OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February.