Short Term Trading Weekend Lounge: 9-11 Nov, page-16

WEEKLY REPORT.

Intro:

The Australian market is at an inflection point.  Things have been going well for a couple of weeks after a serious pull-back.  It could be make-or-break time.

The daily and weekly charts of the XJO are now out of sync.  Daily looks ready for a pull-back.  The weekly is hovering at the lows of the recent pull-back.  We're either going to see a strong bullish move or a continuation of the bearish down-trend.

As a result of the recent strength, a couple of sectors have completed bullish inverse head-n-shoulder patterns, and several sectors have set up potential bullish inverse head-n-shoulder patterns.  Those are the potentials for a strong bullish move.  Wait.

This coming week the XJO and especially the Financials Sector face serious head-winds as ANZ, WBC and Macquarie all go ex-dividend.

• XJO Charts, Daily, Weekly, Monthly.
• Internals – Australian Market.
• Copper
• Sector Charts.

XJO Charts, Daily, Weekly.

XJO Daily:

XJO has moved from the lower supporting line of the Standard Error Channel back up to the top restraining line of the SEC.  Expect consolidation or a pull-back

XJO Weekly:

XJO up +1.24% this week.

The weekly XJO chart is out of sync with the daily chart.  While the daily chart is overly bullish and likely to pull-back, the weekly chart is overly bearish.  We are faced with two possibilities.  First, we might be in the throes of a serious bear market, and we will see it become more bearish.  Or, this long down-trend is about to end.  Wait.

 

XJO Monthly:

XJO is now only seven trading days into the month of November.  That’s not enough data to make any sensible comments about November.

Both the short-term Stochastic and RSI remain on sell signals after the devastation caused in October when the XJO was down -6.08%, its worst performance since August 2015.

The very long-term trend remains up.

INTERNALS – AUSTRALIAN MARKET.

Internals remain weak, although they did improve a little on the previous week.

The number of stocks in the ASX100 that are above their 200-Day MA rose marginally from 31% the previous week to 32% this week.  That is still a bearish reading,

Percent of ASX100 Stocks positive on the Directional Movement Index rose from 23% to 42%.  That remains a bearish number, but improving.

The % of ASX Stocks above their 50-Day EMA rose from 22% to 38%, bearish, but improving

We need to see more improvement in the internals before being confident that the market has turned around.   In the chart below, the blue line shows the number of stocks above the 200-Day EMA. That needs to rise above the 50% line.

In the chart below, when Series Two and Series Three are above Series one, a chance exists that the current bearish trend is over.

Four sectors out of eleven were negative this week.   The best was Property, +3.2%%, followed by Financials +2.82%.  We are still seeing rotation into Financials.  XMJ (Materials) was up 5.05%.  The worst performers were Utilities -2.92% and Consumer Discretionary -1.03%

Copper Futures:

Copper fell this week -4.36%.  At remains in a consolidation pattern.

Much promise is being held out for an American/China trade deal.  That may the catalyst for a break to the upside.

SECTOR CHARTS

XMJ (bullish, with the possibility of a negative trend change):

XMJ was up this week, +0.3%.  The index was up >7% from late October but fell on Thursday and Friday which might be the end of this bull rally

The XMJ is now sitting on the 200-Day EMA, which sets up the possibility of a bounce off that support level and then the possibility of a bullish inverse head/n/shoulders pattern.

Lots of positive possibilities – but the action in American stocks and commodities on Friday night suggests the positives might be a false hope.

For the past couple of weeks, XMJ has been performing more or less in line with the broad market (XJO).  Before that it was outperforming the broad market, so it could still be the place to look for stocks.

XMJ has some very strong stocks, e.g., EVN, FMG, ORI, IPL, RIO.

It also has some very weak ones, mainly in the building area, e.g., BLD, CSR, JHX, BSL.

XEJ (bearish:

 

XEJ is in a medium-term down-trend.  It is consolidating at the lows of that trend, down marginally this week -0.19%.  It has been underperforming the XJO since early October.

Energy in the U.S. is now extremely oversold and could provide a bounce which will feed into the XEJ.  Watch.

No stocks appeal in the XEJ at this stage.

XIJ (bullish with the possibility of a negative trend change):

XIJ was one of the better performing sectors this week, +2.51%.  Indicators are on short-term buy signals, and the Index has risen above its 200-Day EMA.  It is now at the next level of horizontal resistance and fell on Friday, -0.82%

CPU is the only stock of interest.

XXJ (bearish with the possibility of a positive trend change):

XXJ had a good week, up +2.82%.  That was a good performance by XXJ as it saw NAB go ex-dividend on Thursday.  NAB down -3.63% on Thursday.  ANZ and Macquarie go ex-dividend on Monday.  Westpac goes ex-dividend on Tuesday.  So XXJ will face serious head-winds in the coming week

XXJ has now reached its 50-Day EMA which might prove a stumbling block.  It is a long way below its 200-Day EMA, so we could be seeing a counter-trend move.

Since mid-October, XXJ has been out-performing the XJO so we are seeing money rotating into the Sector. That may largely be an attempt by short-term investors positioning to dividend strip three of the big banks and Macquarie.

The strongest stocks are QBE and CBA, neither of which will be hit by ex-dividend events.

XUJ  (bearish):

XUJ (Utilities) fell heavily this week -2.92% and broke below a major support level.

It remains below the “cloud” and below the 200-Day EMA.

Ausnet looks to be the best opportunity in this Sector.

XDJ  (bearish):

XDJ had a negative week -1.03%.  Any bounce is likely to be a counter-trend rally.

I mentioned last week that Domino’s is one of the most shorted stocks in the XJO. The shorters had a bonanza this week.  DMP down -10.7% on Thursday.

On the other hand, Rea Group had a great week, +7.99%.  That’s not worth chasing now – but it might look to buy the dip.  REA Group is the only stock in the sector showing any strength.

XHJ (bearish with the possibility of a positive trend change):

XHJ down -0.64% after a very strong week the previous week.  XHJ is the third sector in this survey showing a potential bullish inverse head/n/shoulders formation.

It is, however, just holding above the 200-Day EMA.  A break back below that could be very bearish.

CSL remains my preferred stock in this sector but on Friday it suffered from heavy intra-day selling once it hit the 50-Day EMA.  Not all that exciting.

XNJ (bearish with the possibility of a positive trend change):

XNJ rose this week, +0.99%.  It has actually completed a bullish inverse head/n/shoulders pattern.  It remains below its 200-Day EMA, so this might only be counter-trend rally.

TCL, AZJ and QAN are the strongest stocks, but I’m not all that keen until they can get back above their 200-Day EMAs.

XSJ (bearish with the possibility of a positive trend change).

XSJ rose +2.32% this week.  It has also completed a bullish inverse head/n/shoulders pattern.

The significant development in this sector has been the out-performance of Woolworths compared to Wesfarmers.  

Woolworths is now the strongest stock in the sector followed closely by CCL.

XTJ (bearish):

XTJ up +0.55% for the week.  On a relative basis it has been deteriorating slowly since late August.  This may be hiding some stealthy accumulation.  Watch

XTJ consists of only two large-cap stocks, Telstra and TPG.  At this stage neither is enticing, but both deserve watching.

XPJ (bearish with the possibility of a positive trend change):

XPJ up this week, +3.2%.  It may be in the process of forming a wide double bottom – or maybe it is just range trading.  Wait.

IOF is under take-over action.  Leave that out of calculations.

GPT has some appeal – look to buy dips.