Australian & US Market Report - 12 June 17

Happy Queens Birthday. If you are unaware the market is closed on Monday because of this. This will mean we have 2 leads from overseas to catch up with come Tuesday morning. The lead we got from Friday night was massive in many ways.

I mentioned last week that what if the leaders, the stocks that were doing all the heavy lifting tripped or stumbled? This is what occurred on Friday and you can see the technical damage in the daily charts of the FANG stocks I have included in the Appendix below.

The Aussie market has already been weak for the last 5 weeks or so and now we are potentially seeing the stocks that have driven the US markets higher taking a stumble. Will this lead on to the US markets turning down and following what our local market has been doing or is this just another buy the dips opportunity? This week will be telling.

For most of you enjoy you’re long weekend. 

Stock Market Technical Analysis

AUSTRALIAN MARKET (XJO)

Australian Market (XJO) Weekly Chart – last 5677.8, Friday 09-Jun-17

AUSTRALIAN MARKET XJO 12 June 17

Important Points to Note from the Weekly & Daily Chart:

  • The Weekly trend is currently Undecided. We have a higher top and lower bottom in place.
  • Last week formed a Down week (a week with a lower high and a lower low than the week before) closing well below the open and about a third up from the low indicating the sellers have stamped their control on the market.
  • The Daily trend is currently Down. We have a lower top and lower bottom in place.
  • Friday formed an Up day (a day with a higher high and a higher low than the day before) closing in line with the open forming a Doji which is a sign of indecision and could be a reversal (back up).
  • We found resistance at the top of the sideways trading range 5795 – 5800 and turned down breaking below the bottom of the range 5700, then 5680 and then ran all the way down to come within 1.8 points of hitting the 5628 target on Thursday. This target has been reached as far as I am concerned.
  • In the process of doing this it has set up another Double Top (5795.7 & 5793.7) which was confirmed with a break below 5679 and this has set up a target of 5565.
  • We have overshot where the third bottom needed to be formed for the potential Triple Bottom I spoke about last week but we managed to close right back on the level by the end of the week so we will keep an eye on it for a little while longer to see if it is setting up or not. It will still need to trade above 5956.5 to confirm the pattern which is a good distance higher setting up a target of 6234.
  • We have now fallen 326.7 points or 5.5% from the 5956.5 top which adds a lot more weight that this is the second top, in a larger Double Top reversal pattern, with the top back in March 2015 at 5996.9. If this is the case then this is Bearish and indicates lower prices are waiting for us ahead. You can see this in the weekly chart above.
  • The last 3 days have all been what you could call reversal days and they are at the end of a move down so they are in the right position to form a reversal in relation to the daily trend. Each has reversed from the low to close at or above the open if not the high. Thursday looks like a White Hammer (Japanese candlestick reversal) whereas Wednesday and Friday are both Doji’s. Add this to the 5628 target being reached support is looking like it’s coming into play.
  • There is an Inverted Head & Shoulders on the intraday chart below which adds to the weight that buyers are stepping up to the plate around these levels at least in the short term.
  • There is potential resistance between 5680 – 5700 which is the bottom of the previous sideways trading range it was trading in just last week. Above here it could push back up to the top of this range towards 5790-5800. Below 5628 we are looking at 5611 which was the top back on the 1st August, 2016 which also happens to be where the bottoms are at the end of January, 2017.
  • Volatility (XVI) pushed up 10.4% over the week closing at 12.70 and this was after retesting the 14.00 level (13.90 high) earlier in the week. This is the top of the trading range it is in and needs to break if we are to confirm the Double/Triple bottom we are watching. See the XVI chart in the Appendix.
  • Volume on the weekly chart was a touch less than the week before but in keeping with what we have seen over the last 4 weeks. Likewise the daily volume was consistent across the week. Fridays up day volume was the second lowest for the week but the volume on Tuesday was lacking for the size of the range on the day. 

US MARKETS (S&P 500 & DJIA)

US Markets (S&P 500) Weekly Chart – last 2431.77, Friday 09-Jun-17

US MARKETS SP 500 DJIA 12 Jun 17

Important Points to Note from the Weekly & Daily Chart:

  • The Weekly trend is currently Up. We have a higher top and a higher bottom in place.
  • Last week formed an Up week (a week with a higher high and a higher low than the week before) closing below the open and around the mid-point for the week indicating the seller’s took over control.
  • The Daily trend is currently Up. We have a higher top and a higher bottom in place.
  • Friday formed an Outside day (a day with a higher high and a lower low than the day before) closing below the open and at the mid-point of the day.
  • We made another new all-time high this time 2446.20 which is 5.97 points or 0.2% higher than the week before. This is the 5 new all-time high in as many weeks. It has been really just a touch or a kiss and not a real break of the March 1st top 2400.98, the way I see it. We are now 1.9% above this previous top and if we move greater than 2% higher this would greatly lower the probability that this is the second top in a Double Top reversal pattern which I have believed was on the cards of setting up.
  • Friday has the largest range since the 17th May, 2017 when news broke that Trump could be impeached however it moved up into the high before selling off just over 30 points or 1.2% to make the low. Then it turned around recovering half of the fall into the close. This was a very volatile day and it really stands out form the small range days we have grown accustomed to in recent time.
  • On the weekly chart the high of Friday regained intraday but closed below the uptrend line from the February 2016 bottom which has predominately acted as support. This is a little bearish and it’s still under the lower very long term uptrend channel line from 2011 which should act as resistance.
  • Friday’s high has taken over the position of the previous top as the number one candidate to confirm the second top in what may be a Double Top reversal pattern. First we need to confirm it’s a top, and then it needs to break below 2322 to confirm the pattern which then sets up a target of 2245.
  • Outside days can be reversals and with such a larger than normal range and increased volume the table has been set for a larger reversal to play out.
  • Volatility (VIX) fell to the lowest level (9.37) since December 1993 some 23.5 years ago on Friday’s trading. After reaching this historic low it then spiked 29.2% to make the day’s high before selling off again to close half way on the day’s range. It closed at 10.70 up 9.7% for the week. This is still on the historically low side of normal. However I think you can see volatility still has a heartbeat and it’s far from dead. See the VIX chart in the Appendix.
  • Volume on the weekly chart has spiked up over the volume of the last 2 weeks thanks mainly to Friday. On the daily chart we can see that volume has been increasing as the week went on with Friday having the greatest volume. The question is are sellers gaining the upper hand here once more as Friday’s Outside day spent almost as much time moving up as it did moving down.
  • I have come up with the following levels from different methods that will be important to watch for resistance as we move higher into Blue Sky 2267, 2279, 2286, 2293, 2305, 2318, 2334, 2385, 2401, 2423-2427, 2457-2459, 2480 & 2485.
  • The daily trend is Up, the weekly trend is Up and the monthly trend is Up.  

Shane also provides commentary on US Market. Contact share to get the full complimentary report.

 

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About Shane Langham

+61 (7) 3338 3838 Email Profile

Shane has passionately followed the markets since the age of 16, and has been an adviser in the financial markets since the year 2000 having worked for a range of firms, including one of the world’s largest investment banks as well as smaller boutique broking firms. Shane is also a past Vice President of the Australian Technical Analysts Association (ATAA) Brisbane, a position he held for 6 years.

Shane is currently a Senior Private Wealth Adviser at Phillip Capital and can assist you with all of your stock market needs - whether you are looking to buy or sell shares, set up a portfolio, grow your SMSF, protect your portfolio, or trade the market. He specialises in technical analysis, risk management, and options trading and focuses predominantly on the Aussie markets.

Shane also writes two key market related technical analysis reports (including a free weekly Market Commentary Report), designed to give traders and investors the best chance possible to get the results they are after from the markets. To find out more about these reports please click here. http://www.phillipcapital.com.au/shane-langham

Shane lives on the sunny Gold Coast with his wife and two dogs. He loves chatting about the market with other like-minded people, so don’t be afraid to pick up the phone or send him an email.

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