XJO was up +1.36% this week putting an end to the ABC pull-back which began on 11 March and lasted. five days.
8 March set a new all time high for the XJO of 7854. XJO finished Friday at 7771. XJO is currently just -1.05% below its all time high and remains in a strong up-trend.
Daily Chart for XJO
Since mid-January, XJO hasn’t closed below the lower band of the narrow Bollinger Bands (10/05). That support level came under serious threat twice since mid-January (14 February and 15 March) but recovered both times to reverse to the upside.
RSI(14) has only breached its mid-line once since mid-January. That was at the end of the ABC pull-back. On 15 March, RSI(14) fell to 49.5 – not a serious breach. That day was a wide-range down day with a long lower tail – indicating plenty of intra-day buying. The market then recovered.
Until otherwise indicated, the trend is up – stay with the trend. Look to buy dips and pull-backs.
NewHighs minus NewLows Cumulative.
This chart is a good long-term trend indicator. It is a lagging indicator and is often late to signal the start of a trend and to finish a trend. While it is trending up and remaining above its 10-Day Moving Average, long-term investors can rest easy.
The trend on this indicator has been inexorably up (despite pull-backs on the XJO) since mid-December. Nervous Nellies might have had the shakes during pull-backs in February and March, but NH-NL Cum would have been a steadying influence.
What’s been happening this week in the Australian Sectors?
Sector Changes this Week.
Only three sectors were down this week: Staples (XSJ) -0.51%, Utilities (XUJ) -0.33% and Telecommunications (XTJ) -0.12%. XSJ and XUJ are both defensive sectors which tend to do relatively poorly during growth phases of the market cycle.
Materials (XMJ) showed good form this week, +2.35% after hints from the three big miners the previous week that they might be turning around. Energy (XEJ) also did relatively well, up +1.35%. I wouldn’t get too excited about the resource stocks, however, as big volume in OZR (ETF for Resources) suggests some downside to come.
Momentum
Before a stock or sector can turn down, momentum has to slow. A quick way to check momentum is to compare Weekly RSI to Daily RSI:
There are surprises in this graph. The sectors where momentum appears to be improving are XMJ, XEJ, XUJ and XSJ. XUJ and XSJ were both negative this week, so they may be returning to favour. XMJ and XEJ improved after recent weaknesses. But, as noted above, I’m not confident about further upside in the resources.
Other sectors show slowing momentum: XXJ, XDJ, XIJ, XTJ, XHJ, XPJ, XNJ. That doesn’t mean that the sectors will turn down – just a warning sign to be careful.
Put/Call Ratio – New York Stock Exchange.
The P/C Ratio has reached an extreme high. Usually, this occurs as the stock market makes a low. A series of extreme high readings were seen in October, which signalled the end of the bearish correction.
In January, the P/C Ratio soared having a fit of the conniptions when a small pull-back occurred – but the market then continued on its strong up-trend. Most likely, as the extreme high on the P/C Ratio has occurred at an extreme high on the SP500, contrarians will take that as a sign that the bull market will continue.
Conclusion.
The Australian market rallied this week after an ABC pull-back the previous week.
The XJO remains in a bullish up-trend. Stay with the trend until it obviously end. There is no sign yet that an end is in sight.
Good luck.
Australian Market Report 