Posts Tagged ‘XJO’

Markets Bounce in “Risk-on” Move: Weekly Market Wrap

Friday, April 12th, 2013

Stock markets bounced sharply this week on the back of reassurances by central banks globally that they will keep the stimulus tap running at full throttle and some surprising Chinese CPI data that revealed inflation remains in check, which provided support for commodity prices. The US markets have made new all-time highs and the Japanese market is up 55 percent from its November lows, while in Europe the markets rebounded.

In today’s Analyst’s Eye we discuss how you can significantly boost the dividend yield in your SMSF by trading the bank shares using Instalment MINI Warrants.

The Aussie market has rebounded strongly this week as the materials sector surged, after commodity prices rebounded off key support levels. The market is trading at the mid-point of its trading range of the past two months. The ASX recovered from three weeks of selling in a “risk-on” move and resumed its consistent string of gains. It has now been up for fifteen of the past twenty weeks, with the All Ords back around the 5000 level.

The ASX200 market is up 2.6% this week and has broken through the 5000 level near-term. The main driver has been the news out of Japan regarding aggressive stimulus, Chinese data and the optimism ahead of the US reporting of corporate earnings which starts in earnest next week.

The Aussie jobless rate rose to 5.6 per cent in March, its highest level for 3½ years, following a surprise leap in employment last month. This sparked optimism that the RBA will still need to cut interest rates further.

ASX XJO

Key levels for the ASX200 index next week will be 4930 and 5070, with 5000 the key near term pivot level. Volatility is easing and is still cheap, affording cheap protection for your portfolio. We have rebounded back above the 13 and 50 day moving averages, and these will need to hold as support for the positive momentum to continue near term.

ASX sectors all traded higher, with the property sector breaking to new 4½ year highs and the telecom sector just shy, even the materials sector managed to bounce for the first time in 7 weeks.
Protection is still relatively cheap and investors can have cheap insurance for their portfolio and could look to put their money to work, while reducing their risk by using options and warrants strategies.

Remain attuned to the news from overseas, particularly from the eurozone (stimulus), China (stimulus) and the US (corporate earnings). Monitor the US dollar for a guide to the future direction of commodities and equities prices.

Contact me at D2MX Advisory on 1300 610 024 and we can help you trade using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser
D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

Post to Twitter

Markets Grind Higher On Improving US Data: Weekly Market Wrap

Friday, March 15th, 2013

Stock markets ground ever higher this week, with the US markets at all-time highs and the German markets also within sight of their all-time highs, as central bank stimulus will continue into the foreseeable future.

Protection is still cheap and this is supporting the up-move. The bears continue to make their presence known in the resources sector and sold down the Chinese market again this week, which is now down -7% from its recent high.

Markets remain at multi-year highs, with many markets holding the break outs from their recent trading ranges. Market volatility is contracting, as investors are holding their protection in place to hedge their recent gains. The Australian market is looking to close down for the week, dragged down by the materials sector.

In today’s Analyst’s Eye we explain how you can identify where the big money is positioned in the market, using a simple system in “Show Me The Money“.

In the US, markets continued higher this week with the Dow Jones up for a tenth session, marking its longest winning streak since November 1996 and making new all-time highs again. The S&P500 index is within 2 points of its record highs, while the volatility edged towards its lowest levels in six years. The three benchmark indexes held on to recent gains this week, with the Dow Jones up 10% for the year. Trader sentiment has been boosted by weekly jobs data continuing to improve, as first-time jobless claims fell by 10,000 to 332,000, the least since mid-January and the four-week average has now declined to a five-year low. Earlier, retail sales enjoyed their largest increase in five months, as the Commerce Department figures showed a 1.1 percent advance in retail sales in February, more than double the forecasts (up from 0.2 percent in January).

European stock markets have held on to their recent breakouts and are trading at new 4 1/2 year highs. Traders are looking for positive outcomes from the region’s two-day leaders summit in Brussels, where eurozone finance ministers meet to discuss a bailout for Cyprus and policy makers may even loosen austerity measures, as the recession and mounting unemployment in southern Europe outweighs the eurozone debt crisis issues in the near-term. In the UK the FTSE advanced, extending its highest level in over five years, led by the retailers. In Germany the market broke above the 8,050 level and is approaching all-time highs.

Asian stock markets have generally consolidated this week, but Japan continued higher. The MSCI Asia Pacific Index is up 4% for the year and is still holding around levels not seen since August 2011. The regional benchmark index has hit a 19-month high this week. The Chinese and Hong Kong markets found some support, after their recent sell-off due to comments from the Chinese central bank chief, who said the bank is on “high alert” for inflation. Recent data showed inflation accelerated in February, while industrial output had its weakest start to a year since 2009 and lending and retail sales growth slowed.

Chinese developers and miners weighed on the markets as the People’s Bank Governor said monetary policy is “no longer relaxed”. The markets have struggled since the government moved to cool off the property sector and this week the Shenzhen land authorities will not approve the sale of new property projects with higher prices. The Shanghai Composite Index has lost 7 percent since its February high, due to concerns that the government will tighten monetary policy at the same time as economic expansion slows.

In Japan the Nikkei 225 Stock Average is the best performing developed market benchmark index this year, advancing after the lower house endorsed Prime Minister Abe’s nominees for the Bank of Japan’s leadership, who are expected to support a pro-stimulus policy for central bank. The Japanese the market is up 43% since its November lows.

The Aussie market has exhibited some volatility again this week, but is still trading around 4 ½ year highs. The ASX is looking to close down for the week, after having a consistent string of gains for fourteen of the past seventeen weeks, with the All Ords hovering around the 5100 level. The ASX market is testing the 20 day moving average, which has not been broken since the up-move began last November.

The ASX200 has tested the 5030 level near-term and has bounced again today. It is time to get your protection in place if you have not already done so.

The main domestic news this week has been the employment report which showed signs the economy was gathering pace with 71,500 jobs added over February, however drilling down we see that part-time employment jumped a sharp 54,000, while full-time employment only rose 18,000 in February. The market was weaker on the news, as economists were prompted to push out their dates for the next RBA rate rise.

XJO

Key levels for the ASX200 index next week will again be 5000 and 5180, with 5080 the key short term pivot level. Volatility is picking up, but is still relatively cheap and affords cheap protection for your portfolio. We are closing down from a new weekly high, as traders are starting to be a little more cautious given the spectacular run in stocks this year. The materials sector has been the major drag on the market this week, down -2.5%, but we are also seeing profit-taking in the banks and the defensive sectors, with the banking index having its first down week since November.

Remain attuned to the news from overseas, particularly from the eurozone (Brussels summit), China (stimulus) and the US. Monitor the US dollar for a guide to the future direction of commodities and equities prices.

Protection is still relatively cheap and investors can have cheap insurance for their portfolio and could look to put their money to work while reducing their risk by using options and warrants strategies.

Contact me at D2MX Advisory on 1300 610 024 and we can help you trade, using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser, D2MX

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

Post to Twitter

Markets Higher As Investors Play Catch-Up: Weekly Market Wrap

Friday, January 25th, 2013

Traders globally have continued to push markets higher as they charge into 2013. Read today’s Analyst’s Eye for our review of 2012 and guidance for investing in 2013.

The Australian market has now traded higher for nine of the past ten weeks and trading volumes are picking up. The Aussie market is likely to trade higher into the end-of-month next week. Stock prices continue to rise consistently, as they have done since the November lows, in the US and the European markets as well.

US stock markets continue to rise, as the earning season gets underway in earnest. Of the 134 S&P500 companies that have reported, 97 have exceeded expectations. The markets are now pushing beyond their 5-year highs and are now just 4% below all-time highs. The next near-term target for the S&P500 is 1525.

The US House voted to temporarily suspend the nation’s borrowing limit, as they lifted the government’s $US16.4 trillion borrowing limit until 19 May. This move is seen as eliminating the risk that House Republicans would be blamed for a default in the short term. Positive trader sentiment was driven by the better-than-expected weekly jobs data and an index of leading economic indicators (a gauge of the outlook for the next three to six months) climbed 0.5 percent last month. Also Chinese manufacturing expanded at the fastest rate in two years, according to a survey of companies.

European stock markets have continued higher since last November. The Europe Stoxx 600 is up 3.3% for the year and trading volumes are picking up. Traders have shrugged off news that the World Bank had cut its global growth forecast for this year to 2.4 percent (down from last year’s forecast of 3 percent and after global growth of 2.3 percent in 2012). The World Bank said austerity measures, high unemployment and low business confidence were likely to weigh on economies in developed nations.

The European earnings season has begun, with nine companies listed on the Europe Stoxx 600 due to report earnings this week, while 41 report next week. The three benchmark indexes are all close near their recent highs and are up over 10% from their November lows.

In the UK the market climbed to its highest level since May 2008, as unemployment unexpectedly fell and the PM pledged to hold a referendum on Britain leaving the European Union. In Germany the market is higher on the back of reports that showed eurozone manufacturing and services contracted at a slower pace in January, as a Markit Economics composite index based on a survey of purchasing managers in both industries rose to 48.2 (up from 47.2 in December). A reading below 50 indicates contraction.

Asian stock markets have had a great start to 2013 but eased back this week, with the regional benchmark indexes backing off levels not seen since August 2011. The IMF has cut its global growth predictions, however it is maintaining its forecast for China, expecting growth of 8.2 percent this year and 8.5 percent in 2014. The MSCI Asia Pacific Index is still on track to extend its rally for a third consecutive month, on the back of news that showed the Chinese economy is recovering. Chinese shares closed lower despite the HSBC’s Flash Purchasing Managers’ Index (PMI) rising to 51.9 in January, above estimates and up from 51.5 in December. HSBC now expects growth to improve to 8.4% for 2013.

The Australian market has had another strong week, and looks set to test the 4850 level near-term. The market held above the 4750 level and is now hovering above the 4800 level, having broken above the highs of May 2011.

Our market has rebounded strongly since the November lows, on the back positive sentiment around the globe and as the Aussie banks continue higher in the chase for yield. We have also seen money pour into industrial and resource stocks, as investors look for a turnaround in these sectors for 2013.

Key levels for the index next week will be 4750 and 4850, with 4800 the key short term pivot level. Be aware that we may see a short-term top in the market in the next couple of weeks, so be ready to protect your position and/or take profits. Traders continue to be optimistic (and were right to ignore the impending US debt ceiling which has been pushed back to mid-May) on the back of positive news flow regarding the state of the Chinese, US and European economies.

Remain attuned to the news from overseas, particularly from the eurozone, China and the US (jobs and earnings). Monitor the US dollar for a guide to the future direction of commodities and equities prices.

Investors can have cheap insurance for their portfolio, and look to put their money to work while reducing their risk, by using options and warrants strategies.

Contact me at D2MX Advisory on 1300 610 024 and we can help you trade, using a number of strategies that will give you the tools to navigate this market and help you improve your returns on investment.

Michael Hevern
Investment Adviser D2MX Advisory

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

Post to Twitter

Investing in 2013 (continued): Part 9 – Stock Trading Tips for All Types of Market Environments

Friday, January 25th, 2013

Last week we wrote about Investing in 2013 suggesting that 2013 promises to be less challenging than 2012. Given there is still plenty of money on the sidelines and that the RBA cash rate is expected to fall even lower than the current 3 percent, the share market is a logical avenue to achieve better returns than the dwindling cash rate. And the markets pushed even higher this week.

Yield and capital growth will be a recurring theme again this year. In today’s article we do a top-down analysis of the Australian market as 2013 gets underway in an attempt to assess what may be ahead for us in 2013.

Australia in 2012

The Aussie market rebounded strongly in the first quarter of 2012 and again in the latter quarter of the year. The gains were led by the stellar performance of the banks and other high yielding sectors throughout the year and were eventually joined by the materials and industrials sectors, with money moving from the sidelines as the RBA cash rate fell to 3.0 percent.  All in all many investors will be ruing not participating in the eventual returns in equities for the year, but even as late as the end of November the ASX was looking at subdued returns for the year.

20130118_CHART_2012_XJO
CHART: ASX200 Performance for 2012

2013 has begun with a bang as investors, who have been heavily weighted in cash over the past couple of years, scramble to get on board the equities train. The ASX 200 has jumped 3.5% year-to-date (YTD) and is up a whopping 11% from its November lows (refer to the chart below).  We may see the market trade even higher near-term if the market does not consolidate which is what the bulk of the retail investors are waiting for. 

There is an old adage about the market in that it will go in the direction that causes most pain to the vast majority of investors. At the moment it is very painful for those investors who continue to sit on piles of cash as the share market runs away.

20130118_CHART_2013_XJO
CHART: Recent Market Performances

Commodities

The Australian economy is heavily dependent on the commodity cycle, so let’s check out what’s happening with commodities.

Commodities had a roller coaster ride throughout 2012. Gold, silver and copper prices shone, but aluminium and crude-oil prices underperformed. Crude-oil prices actually finished in the red for the year, as illustrated in the chart below.  Base metals had another tough year, weighed down by the slowing economic growth in China.

20130118_CHART_2012_COMMODs
CHART: Commodity Price Performance for 2012 (and 2013 YTD Moves)

Iron ore was a major driver for the materials sector on the ASX, with spot prices ranging from over $US140 down to below $US90 and then recovering over 60% from their September lows, to once again trade over $US150. Expect iron ore prices to drive our materials sector again this year.

This chart also illustrates that commodity prices have begun 2013 with continued momentum.

Gold is holding its long-term uptrend as long as the $US1,600 support level holds, the price should be support by all the central bank easing that is happening world-wide. Copper has been crawling higher in the past eighteen months and the 320 level needs to hold to support the current drift higher.  Silver has been crabbing sideways for the past couple of years and looks set for a major move medium-term.  Crude-oil is trapped within a range between $US80 and $110, with $US100 the key pivot level this year.

The positive trader sentiment has continued into 2013, as seen by the green bars on the above chart.

Investment Themes For 2013

Investors will need to be nimble again this year, in managing their portfolio and trading positions. “Buy and hold” has not worked in the past few years, resulting in investors having to become more active.

Next week we will analyse the market by sector and identify some interesting trends.  If you can’t wait till next week then request the bonus below, which also highlights investments themes and how to invest for 2013.

Bonus

We have compiled a Special Report on Investing in 2013, where we cover:

• Evaluation of the Australian market and what to expect in 2013.
• Evaluation of commodities prices.
• Top-down sector analysis on the Australian market.
• Sectors to focus on this year.
• Investing for Yield and our view on interest rates.
• Investment themes
• How to survive 2013

For a free BONUS report: email  advisory@d2mx.com.au... or call 1300 610 024.

You can also request the trading results from our Advisory service, which performed well in excess of the overall market return in 2012.

For trade ideas and recommendations on how to trade in this market, sign up for a free trial of the D2MX Daily Trading Report, which provides a daily serving of insightful market analysis from the D2MX Advisory team, including:

• Trade ideas and strategies
• Dividend enhancement strategies
• Market scans to watch
• International market analysis, and
• Highlights from the S&P/ASX 200

To request an obligation-free trial, call 1300 610 024 or email advisory@d2mx.com.au.

Contact me at D2MX Trading on 1300 610 024 and I can help you trade, using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment.

Michael Hevern
Investment Adviser D2MX Trading

This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.

2011 Market PerformancesMarket-Performance-2011
CHART: Market Performances in 2011

(Go to Top)

Post to Twitter

Which Stocks Are Ready To Pull Back?

Friday, November 18th, 2011

The overall Australian market had a spectacular run in October this year, up a staggering 15 percent from trough to peak on the ASX/S&P 200. In light of this you may wish to ask the experts what stocks are likely to pull back in the new term.

Market Analyser Can Help

You can use the Market Analyser software to identify keys stocks which are indicating that they’re due for a pull back.

Start by using the Watchlist Wizard tool to quickly create a watchlist of stocks from the ASX Top 300. (See below for instructions on using the Watchlist Wizard.)

We can then use the Prealerts scanner available to Market Analyser users to identify stocks that indicate there is “distribution” taking place, as stock is offloaded into the weaker hands.

Set up this scan through the Analyser Wizard, a handy tool within the Market Analyser allowing you to access the Prealerts indicators. For help with this tool check this post.

Market Analyser: Selecting the Analyser Tool

Yesterday’s scan produced the following list:

Market Analyser: Distribution Scan

As you can see there are a number of stocks that are currently undergoing distribution and could offer a potential sell signal. You may want to research these companies further before entering a trade.

The effectiveness of this scan depends on the current trend of the underlying stock, and we have illustrated this in the following three candidates which came up in a recent scan:

1) AWE Limited (AWE)
2) Metcash (MTS)
3) Spotless (SPT)

Note that you can also use volume as a confirmation of the sell signal, as you would be looking for volume to pick up as the share price falls.

AWE Limited (AWE)

AWE (formerly Australian Worldwide Exploration Limited) is engaged in exploration, development and production of oil, gas and condensate primarily in Australia and New Zealand. AWE concentrates on exploration and appraisal-type assets, in regions of proven prospectivity and where there is a high chance of commercial success.

Market Analyser Scan - AWE Limited

You can see that the Prealerts worked fabulously for AWE earlier in the year, giving four winning sell signals when the general trend of the stock was down. Now that the stock price is attempting to recover, the Prealerts offer a good signal of when the stock price is likely to take a pause. AWE is now at a key resistance level, but you would want the stock price to trade below the previous swing to confirm a sell signal.

Metcash (MTS)

Metcash Limited (formerly Metcash Trading) is a wholesale distribution and marketing company specialising in grocery, fresh produce, liquor, hardware and other fast-moving consumer goods. MTS has four business units: IGA Distribution, Campbells Wholesale, Australian Liquor Marketers and Mitre 10.

Market Analyser Scan - Metcash Limited

Metcash has been trading sideways for the past couple of months and the Prealerts signal has given a great signal that the share prices was due for a pull back. If you took this signal you would be up 4.5% in two days and would be watching carefully for price action around the $4.10 level which has been the key support level for the past couple of months.

Spotless Group (SPT)

Spotless Group Limited is engaged in the provision and outsourcing of labour-based services in Australia, NZ and USA. Their Retailer Services division provides hanger systems, labels and packaging to the garment manufacturing and retail industries worldwide. Facility Services provides facilities management and support services like cleaning, food, linen and garment services in Australia and NZ.

Market Analyser Scan - Spotless Group

Again the Prealert scan gave a great signal back in mid-May. There was another signal in early October which pre-empted a sideways move for 3 weeks, but now we have a signal in as the share price finds resistance at multi-year highs, and offers a low risk sell signal. Note that Spotless Group has confirmed it has received a $698 million takeover proposal (at $2.63 per share) from buyout firm Pacific Equity Partners, but says its directors view the bid as too low. The bid from PEP comes six months after Spotless rejected a $657 million offer from US buyout giant Blackstone Group.

Summary

Utilise the Prealerts features in Market Analyser to scan the markets for your specific trade selection criteria. You will save time and identify some likely pullback candidates.

By Michael Hevern
Investment Adviser

For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research.

Instructions – Using the Watchlist Wizard

1. In Market Analyser, open a watchlist window by selecting Menu > Watchlist
2. Click on the Watchlists item on the top menu bar, and select Watchlist Wizard.
3. In the Watchlist Wizard window click Next, select Australia from the Countries list, then select ASX Top 300 from the Available Watchlists list on the right of the window.
4. Click the Update button. Your new ASX Top 300 watchlist will now be available from your watchlist window.

Disclaimer: The information provided within this article is not an invitation to trade a specific stock, but is intended for educational purposes only.

Post to Twitter

Finding True Performers in the Market

Friday, September 30th, 2011

I was talking to some traders recently who were upset that the companies they held were not doing well. At the same time the markets were lower and the question I was asked was how much the market was influencing the performance of the shares. Fortunately there is a very simple way to answer that question using Market Analyser and the Overlay Security function.

A rising tide is said to lift all boats, so if the market is going up most shares go up and when the market is falling most shares go down. The overlay allows us to pick out the true performers by comparing their performance to the market.

The Overlay Security feature in the Market Analyser software

From the Standard Indicators list, click on Overlay Security, then type in the XCode of the security you want to compare to. .AXJO is the Aussie 200 index which is representative of the Australian market. You are not limited to comparing your shares to the market as a whole, you could compare your shares to the sector, gold or even another share.

Overlay of BHP and the XJO in Market Analyser

In the overlay chart above of BHP versus .AXJO you can see that BHP follows the index very closely. This is hardly surprising given that BHP makes up 15% of the index, so a move in BHP will have a significant impact on the index.

Consider the performance of some other shares that have recently featured in the ASX Company News section of the Trader Dealer blog.

Overlay of Castlemaine Gold and the XJO in Market Analyser

Castlemaine Goldfields (CGT) was certainly outperforming the market strongly through July and August, but currently is falling in line with the market.

Overlay of Sedgman and the XJO in Market Analyser

Sedgman (SDM) fluctuated between strong outperformance in August to underperformance during late September.

Overlay of GoConnect and the XJO in Market Analyser

GoConnect (GCN) is currently outperforming the market quite nicely.

We can compare sectors to the index as well and the two strongest performers at the moment are the Health Care and Consumer Staples sectors. These sectors are considered defensive, with investors buying into these sectors when they fear that the economy is weak, because regardless of how bad things get we all have to eat and when medical attention is required it is not usually a choice.

You can use the Overlay Security tool in Market Analyser to strip away the forest so you can examine the trees that are ripe for harvesting.

By Jeff Cartridge
Education Manager

Try this feature for yourself!

Download a free trial of the Market Analyser today.

Post to Twitter

Winning and Losing Streaks in the Australian Market

Friday, August 5th, 2011

I was recently reading that the Dow Jones was down for eight consecutive days, and that got me thinking about winning and losing streaks in the Australian Market and what advantage these could provide to us as traders.

Dow Jones Chart
Dow Jones Industrial Average

On any given day the Australian market, as represented by the XJO, is higher just over half the time (53%). But to add a second day to the winning streak occurs 25% of the time and a third day it is down to 13%. Long winning streaks are relatively rare with a move up for five days in a row occurring just 1.8% of the time. The longest winning streak was 11 up days in a row that occurred in 2003, shown in the chart below. The next longest winning streaks were three runs of nine days up, also in 2003 and 2004. And then three runs of eight days in 2001, 2005 and 2010. Runs of eight days or more are very scarce, with this occurring just 0.26% of the time.
XJO Winning Streak
S&P/ASX 200 (XJO) – Winning Streak

The longest losing streak for the Australian market was 12 days in 2008. This was followed up with two 9-day losing streaks, one in 2000 and the second in 2010. As with winning streaks, losing streaks of eight days are very rare, occurring just 0.11% of the time.
XJO Losing Streak
S&P/ASX 200 (XJO) – Losing Streak

Even though the Dow fell for eight consecutive days, the Australian market was only lower for three days before managing a bounce during the recent falls, as shown below.
S&P/ASX 200
S&P/ASX 200 (XJO)

If the market has been higher for up to five days this is a bullish sign with a 60% probability the market will be higher the next day and an average gain of 0.1% the next day. If the market continues higher for more than five days then a reversal is likely and the average gain turns negative.

If the market has been falling for five days then this is also a bullish sign. There is a 60% probability that the market will be higher the next day and this extends out to six days with the probability of an up day, rising to 62%.

Longer losing streaks are rare, but in general when they occur these are likely to result in further falls. A fall of eight consecutive days, as we have seen in the US markets, usually occurs during a bear market. A word of caution to all traders out there: the recent falls could be the start of a new leg down in the longer term bear market.

By Jeff Cartridge,
Education Manager

Post to Twitter

Stock Market Analysis: Macro and Technical Analysis of ASX Top 20

Wednesday, April 6th, 2011

Hello all,

I’ve just posted a presentation on a macro and technical analysis of the Dow Jones, ASX 200 and the ASX Top 20.

Watch the presentation here.

Best Regards,

Leon Hinde.

Post to Twitter

Stock Market Analysis: Is the Australian Market Overbought?

Friday, February 18th, 2011

The Australian market has been climbing strongly higher during the last two weeks, but is it overbought at the current levels?

The term overbought simply means it has climbed too high, too fast, and in this situation there is the possibility of the market pulling back. We can use some of the indicators found in The Bourse to answer this question.

The indicators that are used to show overbought or oversold conditions are known as oscillators. These fluctuate backwards and forwards between two extremes, often 0 and 100, or -100 and +100. When the indicator is at the lower level it shows an oversold condition and when it is at the top it shows an overbought condition.

Oscillators that are widely used include Relative Strength Index (RSI), Stochastic or the Williams %R. In The Bourse, when you click on the IND button at the top of your chart, you can select the indicators you want to use from the menu. Click on the Oscillators heading to display the indicators available.

The list includes RSI, Williams %R, Price Oscillator, Momentum, Stochastic and MACD. I personally use the MACD to identify trends, and not as an indicator to identify overbought or oversold conditions.

The Relative Strength Index (RSI)

The RSI shows the relationship between up movements and down movements in the share price. The more up days that occur, the higher the RSI value. Typically the indicator is calculated over 14 days. When the RSI hits an extreme, which is measured as below 30 (oversold), or above 70 (overbought), then look for a reversal in the current trend. By applying the RSI on to the chart of the Australian market (XJO) we can clearly see an overbought condition with an RSI of 84. This is well above 70, which is considered overbought.

The Stochastic (Cstats) Indicator

The stochastic is a fast moving oscillator that identifies whether the share is closing closer to its highs or lows. Time frames used can vary, but here we use 14 days and the slow stochastic is normally smoothed by a period of 3 days. The extremes in the stochastic are typically identified as 20 (oversold) and 80 (overbought) from which a reversal is expected.

Adding this to the chart shows the stochastic is also in overbought territory with a reading of 96. Clearly the market is overbought at current levels, but this does not mean we are about to enter a new bear market. It simply means the risk reward favours a trade in the downward direction or locking in some profits. A similar setup in mid December led to a small decline in early January, while the peak that occurred in early November resulted in a more substantial decline through November.

You can use oscillators in The Bourse to identify overbought conditions. These can be a useful guide to assist you to know when to take profits or even to sell short. The same indicators can be applied to individual shares as well as the market as a whole.

By Jeff Cartridge
Education Manager

Sign up for a 14 day free trial of The Bourse and try using oscillators to identify overbought conditions yourself!

Post to Twitter

Stock Market Analysis: Macro and Technical Analysis of Dow Jones, ASX 200 and ASX Top 20

Tuesday, July 27th, 2010

Hello all,

This morning I’ve posted a new recording covering macro and technical analysis of the Dow, XJO and the ASX Top 20.

Click here to view.

Best Regards,

Leon Hinde.

Post to Twitter