Stock Charts Technical Analysis – US & Australian Market Report 19 Jun 17

It was a big week for just 4 days thanks to the Queen’s Birthday holiday in most states last Monday. Index option expiry was on Thursday morning which could explain why we were so strong leading into it. Once expiry, which took place at the open, was out of the way the market weakened off for the first half of the day before just running across the bottom to the close. This price activity would indicate that the move up was more to do with expiry then some other reason. Friday tried to bounce but it just swung backwards and forwards inside a trading range for the day.

Now the real question, is this a pullback which sets up a higher bottom and is the start of a new uptrend or is this the resumption of the downtrend after this large countertrend spike up?

Stock Market Technical Analysis

We will be looking for clues to see which is the stronger scenario because after all June is seasonally the weakest month of the year, possibly because of tax loss selling and the end of the financial year, and we are only half way through June. Given this we are also only 2 weeks away from the start of July which is one of the two strongest months of the year with the other strongest month being December. With this just around the corner could it start early? My thinking is it’s just a little too early at this point in time.

At 2.25pm Wednesday 21st June we arrive at the Winter Solstice. This is the seasonal start of winter in the southern hemisphere unlike the calendar start of winter being the start of June. This date and a day before or after it has seen many changes in trend in the market so I will be looking for a turn later this week which may provide the answer to the question above. 

Australian Market Report (XJO)

Australian Market (XJO) Weekly Chart – last 5774.0, Friday 16-Jun-17

Stock Charts Technical Analysis

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 an Up week (a week with a higher high and a higher low than the week before) closing well below the open and about a third down from the high indicating the buyers were in control for most of the week.  
  • The Daily trend is currently Undecided. We have a lower bottom and higher top in place.
  • Friday formed an Inside day (a day with a lower high and a higher low than the day before) closing above the open and about half way on the day.
  • The Double Top (5795.7 & 5793.7) which was confirmed with a break below 5679 setting up a target of 5565 looks to have been negated with last week’s strong spike up above the Double Top level.
  • The potential Triple Bottom on the weekly chart is still in play because the third bottom looks like a false break which reversed into a strong up week last week. It will still need to trade above 5956.5 to confirm the pattern which is a good distance higher setting up a target of 6251.
  • 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 Inverted Head & Shoulders on the intraday chart I showed from last week and the 3 reversal candles we got at the end of last week were confirmed on Tuesday with the largest move up since the 10th November, 2016. This more than proves that 5628 is good support and we were setting up to bounce. Within 3 days we had gained 206.6 points or 3.7% just before XJO index option expiry. Did this have something to do with the rally? Yes it did as we saw on Thursday we sold off strongly after expiry had taken place. It’s important to watch for this sort of thing taking place around expiry dates because as you can see they can really move the market around a lot and very quickly.
  • Not only did we push back up to the top of the sideways trading range we did it in just one day with the following day breaking out to the upside and in the process retracing to the Fibonacci 61.8% (5831.7) of the whole move down. This level is also in line with the tops made in January (5827.5) and February (5833.2) this year. This is a very strong move and could be the start of a new uptrend. If this move was mainly on the back of the XJO & SPI expiry then we could see this as nothing more than a short term countertrend spike which will fail and swings lower.
  • Breaking above 5836 would be Bullish and breaking below 5752 would be Bearish in the short term. We are looking for a higher bottom to form which (could turn into an uptrend) would also be Bullish or a resumption of the downtrend which is Bearish.
  • Volatility (XVI) spiked up on Thursday (expiry) but was mainly flat to up 2.4% over the week closing at 12.40. It continues sideways inside its range for the moment. See the XVI chart in the Appendix.
  • Volume on the weekly chart spiked up but again we can put that down to XJO option and SPI futures expiry on Thursday. Being the end of the quarter and the end of the financial year will always see a pick-up in volumes. Likewise, the daily volume was rising Tuesday and Wednesday but Thursday was massive. This was 30% more than the expiry volume seen back in December 2016 or 43% more than what was seen in March this year at expiry. Friday’s inside day volume was also massive but we can’t really read too much into this at this time as we don’t have a direction other than sideways. The other thing that stands out is that Tuesday’s 95 points up was on the lowest volume for the week. The biggest move with the lowest volume makes me think that this is not the real direction of the market, just yet anyway.  

US Market Report (S&P 500 & DJIA)

US Markets (S&P 500) Weekly Chart – last 2433.15, Friday 16-Jun-17

US Market Report 19 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 Inside week (a week with a lower high and a higher low than the week before) closing above the open and around the mid-point for the week indicating the buyer’s held marginal control.
  • The Daily trend is currently Undecided. We have a higher top and a lower bottom in place.
  • Friday formed an Inside day (a day with a lower high and a higher low than the day before) closing above the open and at the high of the day.
  • We failed to make another new all-time high. It is still 2446.20 which is 45.22 points or 1.9% higher than the March 1st top 2400.98, and not a real break at this time the way I see it. 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.
  • We have spent all week inside the range of last Friday. This is developing to be another sideways trading range right across the top. Mainly between 2415 – 2446.
  • On the weekly chart the weeks high was just 2.45 points shy of retesting the all-time high and it found resistance at 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.
  • The high on Friday 9th June is 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 2221.
  • Friday 9th June - 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 3.0% closing at 10.38 over the week which is still down at historic low levels. The daily ranges have been higher than normal over the last week indicating that the market is reacting more to the everyday moves than what it has been doing of late. See the VIX chart in the Appendix.
  • Volume on the weekly chart was the highest since the December 2016 expiry so it was massive. On the daily chart we can see that volume was pretty even from Tuesday to Thursday but Friday was almost double a normal day’s volume to put things into perspective. The week was an inside week and Friday was an inside day so even with this massive volume it’s not really giving us a guide as to what the market wants to do next at this time.
  • 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 Undecided, the weekly trend is Up and the monthly trend is Up.  

 

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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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