Market Comments. 6/10/2010

The market was up strongly today, with the XAO up 1.63% on above average volume.

All S & P Sectors were positive.

The intra-day high today broke marginally above last Wednesday high.

This certainly looks the goods - yet - many indicators still show negative divergences.

Let's see is there's follow through buying tomorrow.

Cheers

Red

Market Comments, 29/9/2010

Last night I expressed reservations about the apparent breakout in the market on Monday.

Since then the American market has closed decisively higher.

Australia today staged a remarkable reversal. The intra-day drop was about one per cent.

So, we're back within the trading range. 4650/4710.

The current candle pattern is a bit more decisive than anything we've seen in the past ten days or so.

We're probably looking at a bit more downside - but the bears won't be happy until 4650 is broken decisively to the down side.

Cheers

Red

Market Comments 22/9/2010

"Time is very slow for those who wait." (Shakespeare)

So we wait. So we wait.

The lines in the sand are clear.

4710.5 and 4648.9

Those are the boundaries for the past six days of trading. A very narrow range.

Today was the narrowest of ranges.

Range contraction gives way to range expansion.

We're coming to the end of this consolidation.

Which way will it go?

Nobody knows. What will the catalyst be for a break? Nobody knows.

Just keep watching the chart.

Cheers

Red

Market Comments 21/9/2010

I've done all sorts of number crunching tonight trying to discern what direction the market might take.

In the end, I'm still left with a simple chart of market action.

A sideways consolidation.

Today was remarkable action. I said a couple of days ago that near term direction would be decided by the high of last Wednesday and the low of last Thursday.

The high on the XAO last Wednesday was 4710.5. The high today was 4710.

I'll leave that with you to ponder on.

Today's action leaves us with two possibilities:

• a break above 4710.5 - and further upside
• a break below 4648.9 - and a double top - with much further downside.

I really don't put much faith in precise points on charts. But today was simply ... incredible.

Anyway - we wait for confirmation of market direction.

The market will show us the way.

Cheers

Red

Market Comments, 13/9/2010

Well, we had a bullish day on the Australian market. XAO up 1.15% on good volume.

After my most recent pessimistic post people must be wondering if I've changed my mind.

Well, firstly, clearly we haven't met any of my criteria for a fall in the market.

I think I'll give this one more day - and if we get a solid up day, I'll hoist the white flag.

About two weeks ago I was reasonably bullish on this market; but events of the past two weeks changed that attitude.

The chart pattern on the XAO (see above) is a bearish pattern (ascending wedge).

Many of my odd-ball indicators are now at levels seen at market tops.

So this looks to me like a last gasp effort.

The market still hasn't exceeded the resistance level high set back in June. A close above that would seem decisive.

And then we're faced with a very overbought market.

That's always the Technical Analyst's big dilemma. Go short at extreme overbought levels? Or go with the flow?

I'm still betting on a sizeable retracement at this stage.

Cheers

Red

Market Comments 6/9/2010

I continually shake my head at the extraordinary beauty in the market. It's ability to confirm and confound, to portray "fearful"symmetry, to offer hope, to tantalise. Homer would have written great epics out of a hero's journey through the terrain, the world that the market presents.

Enough of that. What brought on that bit of poetic tripe? You may well ask.

• First, today's XAO finished at 4615.7. August's closing high was 4615.6. Close enough?
• The XAO finished marginally above the 150-Day SMA.
• The 50% retracement of the April/May decline is 4620 (give or take a few points).
• Today's high was level with the high 20 days ago, i.e., the August high.
• The market took 12 days from the August high to reach its low, and then 8 days up to reach the high of today. A ratio of 1.5:1.

OK - enough of the aesthetic values of the market. What about some hard core stats?

Is it overbought?

Yes and No. The RSI is just above the 60 level. That's the level I'd expect a retracement to occur in a bear market. If this is switching over to a bull market, then there is plenty of upside left.

Looking at the 50-Leaders chart, Yes, this market is overbought. The stocks above the 10-Day MA are well above 80% and now the stocks above the 50-Day MA are at the 80% level (overbought).

A few days consolidation with a downward bias would be healthy for the market.

Now ... for something completely new. I've never done this exercise before, so I have no historical basis for assessing the evidence, but the following figures did concern me. Today was a strong up day (XA) up 0.83%) - nothing extraordinary, but solid.

23 out of the 49 50-Leaders finished lower than their opening price. (Yes, dear reader, you read that correctly. There are only 49 stocks in the 50-Leaders because Lihir Gold has been taken over by Newcrest and hasn't yet been replaced in the 50-Leaders. So, at the moment, only 49 stocks show up in the 50-Leaders.)

So almost 50% of the 50-Leaders finished below their opening quote.

Is something amiss here? It sure looks like it to me.

Now, have a look at the first chart - a 5-Day 15-Minute chart. I've seen hundreds of charts with formations like this - a gently sloping uptrend wedge. More often than not, they break to the downside. They don't have to. But usually they do.

So - the evidence/prognosis is?

We're at medium term resistance.

Lots of indications suggest a downward movement here.

If the market can overcome the negatives at this point - we're in the grip of a very powerful move.

Forget about September being the worst month of the year - just hold on to your hats and enjoy the ride.

Cheers

Red

Weekend Comments, week ended 3/9/2010

The XAO had a strong week this week but remains in a trading range. Last week, I said that there was plenty of evidence that the market was at a short-term bottom. That played out perfectly this week.

So, what now? If this was late-October or early-November, Id be inclined to say No Guts, No Glory, we're at the start of a medium-term bull market. But its early September.

There's not much evidence, yet, that this market is topping other than some over-bought readings and strong resistances ahead. But, as a mythical Sage said, over-bought can get more over-boughter. So, there may be a bit more in this. It's now a matter of going with the flow. The trend is up, I'll stay with the trend until it turns around.

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.

Market Comments. 1/6/2010

Again, nothing much happened today. The market was down 0.4%. Volume was well below average.

If anything there was a slightly more defensive tone to the market with the four defensive sectors all doing better than the market benchmark, the XAO. But really, nothing decisive can be read into that.

The chart of the XAO could be forming a bullish flag - but we'll have to wait for a break higher to be sure of that.

We remain in the hands of the overseas markets.

Cheers

Red

Some Comments on America. 2/3/2010

Looking at the second chart first, everything about this, using conventional Technical Analysis, says the SPX (S&P500) is going higher. Horizontal and vertical resistance has broken to the upside. StochRSI(30) is above the mid-line and headed up indicating that the Index is in an uptrend. The Daily MACD has broken above the Zero line - which is bullish.

So - every trader and their dog should now be long.

OK. Looking at the third chart, the SPX has just hit the 61.8% retracement level - a spot where trends often reverse. One mark against the conventional view - but hardly convincing.

Next, the last twenty-day high was four days ago. This sets up the possibility of a "Turtle Soup Plus One" situation. If the SPX drops below the low of four days ago, 1105, then a retracement of at 2-6 days will probably occur. A retracement of six days would almost certainly break below the low of two days ago - 1086 and that would spark further falls.

What are the odds of the Turtle Soup Plus One setup completing - about 70%. That's not bad odds. 90% would be better. :) but not bad.

Interestingly, the Ozzie market is not as bullish as America. A new 20-Day high has not been created. The XAO has stalled below the 50-Day Moving Average. The daily MACD is still below the Zero line.

Does this lack of confirmation mean anything? The Australian market often pre-empts the American market. So the less than strong performance by Australia today, after a strong performance in America last night, could be a precursor to weakness in America tonight. This may then flow into our market tomorrow.

We shall see.

That's a long story with lots of ifs and buts.

I'll be waiting to see how tonight pans out in America. If it is once again strong, then a test of the January highs is probably on the cards. And we will probably follow.

It's up to you what you do. :) I'm just an old grandfather enjoying my grand-kids and playing around with charts.

Cheers

Red

Market Comments: 1/3/2010

Well - I've looked at today's action from every which way. I've tried all my tricks.

And I'm just left with a simple chart pattern. Nothing earth shattering. Nothing insightful.

We're currently stuck. (My grand-daughter often uses the term, "It's stuck".) Well, here we are: it's stuck.

Right there in a symmetrical triangle.

Nothing to do but just see which way it moves. Up or Down.

I wish I had something more insightful to offer. But ... there it is. It's stuck.

Cheers

Red

market Comments: 15/2/2010

I'm sure you've see movie images of a crowd at ground level, looking upwards, and a person up on the top of a building threatening to jump. In the background is a concerned, sweating, empathic police person waiting their moment to help the poor distressed person on the edge of the building, but unable to act because, if s/he does, the distressed person might make the big jump.

Meanwhile, down below, the camera crews wait. Some people are yelling out, Jump.

The distressed person moves an inch or two towards the edge. And no more.

Everybody just waits.

That's how it as today on the Australian stockmarket.

On a very low volume day (the lowest volume since the Christmas Holiday period) nothing much happened - but that belies the tensions below the surface.

The market edged just a little closer to the edge. Not enough to go over. But enought to give the crowd below yelling "Jump" a little more hope that their wish will come true. SPLATT

4500 beckons like the Sirens for the Argonauts.

Even the Governator knows this is important. :)))

Cheers

Red

Summary of Last Week's Report 05/02/2010

The theme of this week’s report can be summed up: The precipice looms. Does the market tumble over or step back?

Many Indicators are reading “oversold”. On balance, once again, the outlook favours a short-term bounce.

The market is currently testing the Oct. 09 low at around 4500. If that fails, I believe we will see a resumption of the bear market. Or, at least, a major correction going down to the June 09 high.

The positive divergence on the Advance/Decline Line suggests that this is not the beginning of a new bear market downtrend. The very negative chart of the Hang Seng (Hong Kong) suggests otherwise. And not much else supports the bullish view. Plenty of Indicators and charts are teetering. But – until 4500 succumbs, the market still belongs to the (somewhat nervous) bulls.

The Decade Trend and the Presidential cycle (see previous reports) suggest a reversal to the downside sometime in the first quarter of 2010. We may be seeing the start of that process now. We’ll continue to monitor that scenario closely. Remember – that is just a scenario – not a prediction.

And watch for Black Swans – they can appear at any time. (PIGS, China, Iran, terrorists, tsunamis, earthquakes, volcanoes, Venezuela, Argentina, California, who knows what? … the list goes on and on.)

NOTE: The XJO is now setting up for a Connors and Raschke “Turtle Soup plus One” short term trade.

The rules were developed as an alternative to set-ups used by the Turtle Traders which have a high percentage failure rate.

The rules are relatively simple and based on fading a breakout:

Buys:

1) The market must make a new 20-day low. The prior 
20-day low must have been made at least three trading sessions earlier. The 
close of the new low (day one) must be at or below the previous 20-day low.

2) An entry buy stop is placed the next day (day 
two) at the earlier 20-day low. If you are not filled on day two, the trade is 
cancelled.

3) If the trade is triggered, place a protective 
stop one tick under the lower of either the day one low or the day two low.

4) These reversals are often short-lived, so take 
profits within two to six days and trail stops on positions that move in your 
favor.

The low on the XJO three days ago was 4524.1. The close on Friday was 4514.1. Best of Luck

Late night comments, 5/1/2010

(Click on the charts above to see a bigger version.)

The first chart above shows the number of stocks from the 50 Leaders making new 20-Day highs. This is now at an extreme level of 60% (30 stocks). At the previous high of the All Ordinaries (XAO), in mid-October, the percentage of stocks making new 20-Day Highs was 40% (20 stocks).

This is beginning to look like a blow-off top.

Then look at the next chart.

This now has the complete profile of an over-bought market. The percentage of stocks from the 50-Leaders above the respective 10-Day, 50-Day and 150-Day Moving Averages is as follows:

• Above the 10-Day Moving Average - 90%
• Above the 50-Day Moving Average - 90%
• Above the 150-Day Moving Average - 96%

These stocks can, of course, stay up there for extended periods of time. But when they start to fall - this market will probably fall hard - at least in the short term.

What's fascinating about these stats is, while the number of stocks in the 50-Leaders making new 20-Day Highs is at an extreme (new) high, the percentage of stocks above the 10-Day Moving Average has dropped back in the past two days from 98% to 90%. hmmmm. Somethings out of kilter here. This divergence may or may not mean something. But it certainly looks ominous.

Cheers
Red

Market Comments, 5/1/2010

(Click on the above charts for larger versions.)

Very simple initial comments today. The market is overbought (so what else is new?)

But as the great stock market guru once opined: Overbought can get more overboughter!

RSI is now above 70. The market won't turn down until the RSI turns back down below 70.

The market has been up seven out of the eight last days. That's about as far as a market goes without consolidating or retreating.

The XAO now seems to be in an upsloping channel (see top chart). If we get a drop here it should go back somewhere close to the bottom of the channel - now around 4700.

If the XAO breaks higher, then it's probably going into a blow-off top. Which will end badly.

About three months ago (at the first Brisbance meet-n-greet for investors) I suggested that this bull rally would only finish with a blow-off top. We may be going to see that now.

But - if we get a retracement - then this bull rally will have more legs.

Let's see what the next couple of days will bring.

Just one more point - the Ozzie Dollar is once again rampaging upwards. It's now broken back above the neckline of the Head-n-Shoulders top - so more upside seems likely. In that case - we may be looking at a blow-off top on our market. We shall see.

I'll add more comments later tonight after I do more analysis.

Cheers
Red

Market Comments, Tues, 22/12/09

The market (XAO) had a strong move up today, +1.4%. We're now into the holiday period and volume has lightened off. Today was about half the 50-Day Average. Such light volume allows for greater volatility which we saw today.

The Advance/Decline Ratio was reasonable without being spectacular, 1.4/1. But UpVol/DownVol was a bearish 0.76/1. A bit odd. It's rare for the UpVol/DownVol to record a bearish number on such a strong day.

Just to add to the oddity, Small Ordinaries was up only 0.9%, while the 50 Leaders was up 1.5%. Again, strange to find risk aversion dominating on such a strong day.

I've been concerned that the Ozzie Dollar has had a trend change from up to down - but the market hasn't followed suit.

It would be normal now for the Ozzie, after a big drop like its had, to have something of a reaction rally up - and take the XAO up with it. So the XAO could break out to the upside if that happens.

I've been looking for evidence that the currency drop is having an effect. And I've found it in, at least, the Health Care Sector (see chart above). Health Care, dominated by CSL, Resmed and Sonic Health Care, is highly dependent on overseas earnings. So when the Ozzie drops, that improves returns to these companies when they repatriate earnings back to Australia.

We can see in the chart above that the Health Care/XAO Ratio has poked above the 65-Day Moving Average. The only time in this bull rally from March that it has been able to move significantly above the 65-Day MA was back in June/July when the general market was retreating. That is what would be expected. At that time the Ozzie Dollar was also in retreat. The market and the Ozzie were correlated. In such a case, Health Care has a negative correlation to the Ozzie, so that sector moved up in a counter trend move, while the market moved down.

Now, we have Health Care, as expected, moving up while the Ozzie moves down. Again - negatively correlated. But the general market hasn't acted as expected. Perhaps I'm wanting the relationship to be too close and it will happen. Or perhaps something else is operating that I'm not aware of.

Anyway - it would pay to be careful - and take advantage of an upside break-out if it occurs.

Somehow, I think in the medium term, the past relationships will assert themselves. Fundamentally, if the Ozzie is falling, money is being drawn out of Australia. This hurts liquidity and the volume of money available for investing in the stock market. So we should expect the market to fall with the fall in the Ozzie. Perhaps we should be patient and see how it pans out.

Putting it all together, the market was up strongly today - but, perversely, risk aversion was obvious. The Ozzie Dollar is weak which should affect the market adversely. So, I think the risks still lie to the downside rather than the upside.

Quick Comments, Monday, 14/12/09

First, from Quantifiable Edge, This week is options expiration. Over the last 25 years December options expiration week has been the most consistently positive week of the year for the SPX. . . . The bullish tendencies over the last 25 years have been exceptionally strong. . . . not only do you have strong indications that this upcoming week carries an upside edge, but also out as far as 3 weeks.

Today saw a big spike on the Australian market which started at about 3.20 and took the XAO up over 39 points from being down -22.6 points to being up +16.8 points. Extraordinary.

Most people put this jump down to a bail-out by Abu Dhabi of Dubai World.

American futures are currently up about 90 points.

OK - that's all the exciting stuff.

Let's get down to some figures.

Today was a low volume day, less than one billion shares traded, while the 50-Day Average is about 1.34 Billion. (And the 50 Day Average has been steadily dropping since August.) So, there's not a lot of conviction there.

The sector/sub-sector to benefit from action today based on volume was XXJ (Financials less Property Trusts) with a volume today 1.2 times its 20-Day Average. Despite this, XXJ ended flat on the day, up just 1.2 points at 5349.6. But from the low of the day to the close, the index jumped +1.26%. Quite a reversal.

The Advance/Decline Ratio today was bearish at 0.89.

The Small Ordinaries and 50 Leaders were level pegging, both up +0.4% in line with the XAO, up +0.4%

The Defensive Sectors were the best performers today: Consumer Staples +1.4%, Telecommunication +0.9%, Utilities +0.8%, and Health +0.6%. Health was equalled by Materials and Industrials; but generally the Defensives had the better of the day.

On balance of all those factors, despite the spike high late in the day, the general tone of the final results favour a bearish outlook.

Tomorrow may depend largely on whether the spike high on the Aussie market and the American futures is just an over-reaction to the Dubai events, or the start of something bigger. If American can sustain that burst during tonight's trading, then our market is probably a good medium term bet. We shall see.

I'll have some further comments later tonight when I do some more analysis.

Weekly Comments - Week Ending 04/12/09

IT’S ALL ABOUT THE DOLLAR

The Australian Dollar is in a sideways consolidation. The key support and resistance lines are shown on the chart below. The sideways consolidation has broken out of the rising wedge; but until horizontal support is broken, we must presume the trend remains up. So long as the Ozzie remains in an uptrend, this will support our stock market.


Corrections in the Australian stock market are marked by slowing momentum in the Ozzie Dollar. The market has returned to a bullish stance whenever the Ozzie has regained momentum. At the current time, the Ozzie has still not regained its upward momentum. Momentum is determined by the distance of the Ozzie Dollar from the 50-Day SMA. The following momentum chart clearly shows the relationship between momentum on the Ozzie and the Australian Stock market. The three major corrections which have occurred this year are clearly marked by loss of momentum in the Ozzie Dollar.

Until momentum returns to the upside, the Australian market will remain in a sideways-to-down correction.

Market Comments. Thursday, 3/12/09

After another choppy session today, the All Ordinaries finished up +0.3%.

No surprises were seen in the market details. The Advance/Decline Ratio was up modestly at 1.26. The Small Ordinaries did a little better than the Fifty Leaders, which is bullish. The worst performing Industry Sectors were the Defensives (Consumer Staples, Health, Telecommunications, Utilities) which were all marginally negative.

Gold Miners, however, finished on a negative note (down -0.3%) even though Gold has been setting new records. The Gold Miners often lead Gold, so Gold could be in for a consolidation or retracement after a stellar rise up to US$1223.

Looking at the chart above. We must presume we are starting on a new leg up in the bull market rally. The XAO has broken above the down trend line. The MACD is above both the Zero line and its signal line. Both the Williams %R and RSI are giving bullish readings.

We're now into one of the strongest months of the year (December and January are the two best). So this looks like the start of the Santa Rally.

Market Comments 26/11/09

Nothing much to say today. A small drop in the XAO kept the market in the sideways consolidation its been in for over two weeks.

With Thanksgiving in America, we're unlikely to see any dramatic news from there to change market direction.

Gold in Ozzie Dollars continues to power upwards. This is a concern for the wider market. It is unusual to find gold (in Ozzie) and our market also going up.

Other concerns are the Japanese market which has dipped into bear market territory. Also, the American 10-Year Bond Yield, after showing some strength, has adopted a bearish downward slant.

Although it has been widely reported that the American Dollar has plumbed new lows, our Dollar is still well below new highs. So don't be seduced into thinking that a very significant fall in the American Dollar translates into a positive for our market.

To sum up - our market as gauged by the XAO continues in a sideways consolidation. Until it breaks from that consolidation, patience is required.

Market Comments 23/11/09

The market remained in limbo today. Another inside day - modestly up at 0.7% So the market remains between the two key levels: 4820 and 4690. This is only a gap of 130 points.

The materials were up strongly at 1.7%. Financials were down -0.1%. Consumer discretionary was line ball with the XAO at 0.7% after Jerry Harvey gave a bullish account of pre-Xmas trading. Industrials were up reasonably at 1.2%. But the defensives were equal to or better than the broader market: Consumer Staples +1.0%, Health 0.7%, Telecommuniccations 0.8% and Utilities 1.0%.

It's very difficult to read anything of substance into those figures.

At the time of writing, American futures are up strongly at +86. Rarely do we see a down day when the futures are up that strongly even though there is some time to go before the American market opens.

The Ozzie Dollar was up about half a cent - and this supported our market.

Gold in US$ is currently at $1166 - up strongly from Friday.

Gold in AUD was up over 2.05% today. It's difficult to reconcile a rise in AUD-Gold and a rise in the XAO. Something has to give. This is against the "natural order" of asset markets.

We'll have to wait and see which way it turns.