Hello welcome to this week’s edition of Technical Analysis with me, Joel Labi.
Today, we’re looking at global indices and how they’re trekking – in particular, the major US markets and Australia’s largest composite index, the XJO 200.
Let’s start with a look at the DOW-30 – it’s calculated by market capitalization, so you’ll see plenty of household names on it, including retailer Walmart and aircraft maker Boeing, as well as Microsoft, MacDonalds and Sporting goods manufacturer NIKE.
Now, the Dow’s weekly chart shows the March 2013 price movement above the 2007 GFC high as a continuation of Primary trend.
During 2015, the widening volatility pattern became the consolidation of price prior to the November Presidential elections breakout point in November 2016.
The DOW moved into an exhaustion high in early Q1 2018, with Relative strength at an extreme, leading to the current widening volatility pattern.
Right now, the current price movement has set a higher low during Q2 of this year – and that’s led to this current breakout above the 26,600 point resistance level.
Since President Trump’s election, there’s also been a significant increase in trading volumes.
But as prices go higher, those volumes are dropping off, and might be viewed as buyers cashing out – reluctant to add to their positions.
Relative strength Indicator remains above the key 50 level showing continuing positive price momentum.
The MACD is providing a swing sell signal right now and should the market start to soften, that 26,600 level will be the first level of support to monitor.
Should prices move below the level of 26,000 points on a weekly closing basis, a potential retest of the long term trendline may take place.
For daily market watchers – that intraday support level of 26650 is key.
The relative strength indicator remains over the 50 level, and tracking in line with the overall price strength.
While the Daily MACD has provided a swing sell signal, a short term sell given the underlying Primary trend remains UP.
Next, we look at the S&P500, made up of medium size companies across the likes of agriculture, manufacturing and retail.
Its weekly chart from early 2015 shows bullish behavior prior to the Presidential election price breakout, which led to highs at the beginning of 2018.
In 2018 though, we did see a growing volatility pattern develop, with price divergence leading to a decline and retest of the long term trend line at the end of that year.
If you look at the “V” shape recovery in point 3, you’ll see a new price high, followed by the 2750 point higher low of May 2019.
This is the precursor to the fresh highs above the key 3000 point level.
This Index remains in a Primary UP trend, with last week’s retest holding above that breakout level of 3000 points.
Current indicators show a “sell signal” on the MACD.
The Relative strength Indicator 14 remains over the key 50 level showing positive price momentum.
The key level to be monitored though is a weekly close below the 3000 level.
Should further price weakness follow, the Relative strength would be monitored for a movement below the 50 level, indicating a loss of price momentum and a potential retest of the long term trend line – that current tracks at 2450 points.
But with current UP trends, any short term weakness would be seen as the symptoms of a bullish market.
Let’s turn to the Nasdaq now, which of course boasts some of the biggest tech stocks in the world, including Facebook, Google and Amazon.
The index has remained in a primary Bull market since late 2009 following the global financial crisis, with a resistance point of 4870.
That was prior to the 2016 election which sparked a breakout – with that first resistance level shifting up to 7100 and short term support at 6400 points.
We also saw prices move into the 7650 territory, and with that divergence from the RSI, became a catalyst for the decline in December last year.
What followed was the “V” shaped recovery on your charts, pushing new highs of 7830, followed by the important technical retest of the 7100.
This has now shown a higher low above the 100 period simple moving average.
The Nasdaq remains in a Primary UP trend – and that’s supported by the Relative strength indicator remaining over the 50 level.
The MACD is currently showing a swing sell signal, possibly a short term signal in this current Bull market.
The Nasdaq has recently shown a short retest of the breakout above 7830 points.
But should price weakness come into play – that will be the first support level to hold, followed by the now key level of 7100 points.
Should it dip any further, traders and investors would be looking for support at the long term trend line, at approximately 5500 points.
Finally, let’s turn to the Australian market and the XJO 200 – the country’s largest composite index.
It’s heavily weighted with the big four banks, as well as Wesfarmers, CSL, BHP and Rio, along with some, upcoming tech firms.
Its weekly chart begins at that 2014 decline.
Again, we see a breakout courtesy of the November 2016 elections to a support level at 5670.
During late 2018 the level was broken as another retest of the long term trend line took place.
As RSI divergence occurred during this period, a strong signal was provided for the “V” shaped recovery to retest that 6340 point level. We saw this during April and May 2019.
Further upward price trends mean we’re looking at a bull market, with the successful retest of the October 2007 GFC closing highs of 6750.
The market remains in a Primary UP trend, however the Relative strength has entered an extreme level over 70.
Now, this isn’t a bearish signal but does show strong price momentum, which could lead to some exhaustion in the weeks ahead.
This is confirmed by the current MACD sell signal, and declining volumes in this rising market.
The Index remains at an extended distance from the long term trend line and the 100 period moving average.
Should price weakness to come into play, the 6340 resistance level we saw in May 2019 would be considered a support level on any price decline.
The current breakout in price over 6750 is moving on lower trading volumes and not considered a strong breakout.
Overall the XJO is on the up - at all time highs in fact - following the breakout 12 years after the GFC.
This may be an early Cyclical Bull market move.
