Weekly Report.
The Australian market performed well this week – after falling about as low as it could go in the previous weeks. XJO up +3.25%
No Sector is currently rated as “bullish”, but six sectors show potential for a change to a positive trend. These six sectors are Materials, Information Technology, Industrials, Financials, Health, Consumer Staples. Internals remain bearish. Until we see more signs of improvement, we need to be very cautious about this market.
The American market is cause for concern, as some of the highest profile leading stocks (particularly Amazon) are showing potentially bear market characteristics. A Chinese/American trade deal may be the catalyst for a rebound – but that should be carefully watched for signs of deterioration.
- XJO Charts, Daily, Weekly, Monthly.
- Internals – Australian Market.
- Copper
- Sector Charts.
- Scary Chart.
XJO Charts, Daily, Weekly.
XJO Daily:
XJO has had six days on the positive side and starting to show tiredness. The past two days show indecisive doji candlesticks. The Short-term Stochastic (14.3.3) is above its top Bollinger Band. If it turns down (highly likely) we’ll get a pull-back.
XJO Weekly:
XJO had a positive week, up strongly +3.25%. It bounced off a major support level which had multiple touches back in May-October, 2017. If that breaks to the downside, we’re probably looking at a bear market.
Two weeks ago, XJO broke decisively below the Standard Error Channel. It has bounced this past week, but it is likely to be a counter-trend rally.
XJO Monthly:
XJO is now only two 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 from 19% the previous week to 31%% this week. That is still a bearish reading.
Percent of ASX100 Stocks positive on the Directional Movement Index rose from 7% to 23%.
The % of ASX Stocks above their 50-Day EMA rose from 8% to 22%, about the same as the DMI figure.
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.
Only one sector out of eleven was negative this week. The best was Health, +6.73% after a good performance from CSL (the fourth largest stock in the ASX200). Information Technology, the smallest sector in the ASX200, was up +5.05%. XMJ (Materials) was up 5.05%. That was the most broadly based movement of the top three sectors. Look to the Miners for further improvement. The Gold Industry Group (XGD) was down, -0.85% and the Property Sector was down -1.75%. XXJ (Financials) continued to perform well +3.51% ahead of the XJO up 3.25%. Money continues to flow into XXJ.
Copper Futures:
Copper broke downwards from its consolidation early in the week. That proved to be a false break as it rebounded strongly on Thursday and Friday. It remains below its 200-Day EMA, so this may just be a counter-trend rally.
Much promise is being held out for an American/China trade deal. That’s probably behind the rise in copper late in the week.
SECTOR CHARTS
XMJ (bearish, with the possibility of a positive trend change):
XMJ was up this week, +5.05%. On the weekly chart, the weekly candle shows a bullish engulfing candle.
Indicators on the daily chart are on buy signals.
XMJ has been out-performing the XJO since early September, and is clearly one of the Sectors to look for buying stocks.
Three of the strongest stocks are three gold miners, EVN, NST and NCM. That industry group may, however, be pulling back. Look to other miners for possibilities like FMG, RIO, OZL and BHP. ORI, a supplier of explosives and chemicals to the mining industry, is also looking strong.
XEJ (bearish:
XEJ was up +1.34%% this week but continues to under-perform the XJO. It could be forming a base here as it has held above horizontal support.
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 (bearish with the possibility of a positive trend change):
XIJ was up strongly this week, +5.5%. Indicators are on short-term buy signals, and the Index has risen above its 200-Day EMA.
CPU is the only stock of interest.
XXJ (bearish with the possibility of a positive trend change):
XXJ had a good week, up +3.51%. 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. The strongest stocks are QBE and MQG. CBA and WBC are the only banks out-performing the XJO but not by much.
XUJ (bearish):
XUJ (Utilities) rose this week +2.16%. It continues to hold at a major horizontal support level and may be sketching out a bottom.
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 positive week +2.17% after its worst week in many years when it was down -7.54%. Any bounce is likely to be a counter-trend rally.
Domino’s remains the strongest stock. It is also one of the most shorted stocks in the XJO, so movements in the stock tend to be very volatile. One for the traders.
XHJ (bearish with the possibility of a positive trend change):
The squeeze on the Stochastic Bollinger Bands finally paid dividends this week. XHJ up +6.73%. That was largely an artefact of a big move in CSL +8.64% this week.
CSL remains my preferred stock in this sector
XNJ (bearish with the possibility of a positive trend change):
XNJ rose this week, +2.19%. It is currently consolidating between support and resistance. If it can break above resistance, we could see a significant rally.
TCL, AZJ and ALT are the strongest stocks. These are all infra-structure stocks.
XSJ (bearish with the possibility of a positive trend change).
XSJ rose +3.05%% this week.
The significant development in this sector has been the out-performance of Woolworths compared to Wesfarmers.
CCL is the strongest stock but Woolworths is also showing significant strength.
XTJ (bearish):
XTJ up +0.64% for the week. 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):
XPJ was the only sector on the negative side this week, -1.75%. It is once again testing horizontal support. Recently it has twice tested the 200-Day EMA and failed. That’s not a good sign. A break below support would be very bearish.
IOF is under take-over action. Leave that out of calculations.
Nothing else has appeal.
Scary Chart:
This chart should be making investors reach for the sell button. It’s Amazon, one of only two companies in the world valued at more than One Trillion Dollars. (The other is Apple).
The above chart appears to be a classic burst bubble chart. After an exponential rise, the chart then collapses. That’s the stage this chart is now at. After the initial collapse a rebound follows – a bull trap, which then fails and the chart falls further and further.
If Amazon is a classic burst bubble, there’s not much hope for the rest of the market. The flow-on effects will be catastrophic.
Apple, the largest company in the world, is not showing such a dramatic chart but also showing signs of a possible bear market break-down. It’s not there yet – but its chart is also worth watching.
Caution – with a Capital C.
RB
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