Australian and US Stock Market Report – Technical Analysis 18 Dec 17

Australian and US Stock Market Report Technical Analysis 18 Dec 17

Australian & US Share Market Report - 18-December-2017

What is the value of Bitcoin?

This is a question that has been asked ad nauseam by the media of the respected financial market talking heads. You see, without a metric they can use to value something, they are completely lost. So whenever something new like bitcoin or digital (crypto) currencies come along they have nothing. Because of this, instead of looking silly not being able to answer the question, they will talk it down and make it look like why are we even talking about this.

I am sure you have seen your fair share in the media as bitcoin broke above $10,000 USD for the first time back on the 29th November. In fact, on the same day bitcoin traded at $10,000 it traded as high as $11,261 (12.6% higher again on the same day). Compare this to the average long term gain from the stock market here in Australia or the US which is 7.0-7.5% over a year. Keep in mind that this move pales in comparison to the gain bitcoin has made from a low of $750 in mid-January to a current price of $18,000 ($19,372 it went up overnight). This is a gain of $17,250 or 23 times your money (2,300%) and the year is not over yet. Will we see $20,000 reached over the next 2 weeks? They thought we wouldn’t hit $10,000 until sometime in the first quarter of 2018. How wrong they were.

The reason I am talking about this is that if you can read a chart you can identify where you want to buy, where you want to have your stop loss and possibly where you want to take profits, all without knowing how to value bitcoin or anything else. We can do this because we know how to read human psychology, as this is reflected in the charts, which is the underlying driving force of what something is worth at any one point in time. At the end of the day something is only worth what someone else is prepared to pay for it.

I have heard it best described that if you want to make money you find a strong trend and you jump into it. Then you can manage the position from then on with your Charting Wisdom J. Bitcoin and crypto’s are the perfect instruments to trade with charts and they are moving better than the conventional instruments we normally use.

In the Appendix we can still see that the Small Ords are still the best performing end of the Aussie market and haven’t turned down yet whereas Mid-Caps and the All Ords look like they could be turning down.

This is the last report for 2017 as I will be taking a break to work on what 2018 may have instore for us just around the corner. I would like to take this opportunity to thank you for receiving this report and I trust that you have been able to extract great value out of it over the year. I wish you and your family a very Merry Christmas and a very profitable New Year. If you get the chance over the Christmas holidays do your own study of the charts as this can only help you learn more and you may even find the chart on bitcoin an interesting study.

Share Market Technical Analysis


Australian Share Market (XJO)

Australian Market (XJO) Weekly Chart – last 5997.0, Friday 15-Dec-17

Australian Share Market 181217

Important Points to Note from the Weekly & Daily Charts:

  • The Weekly trend is currently Up. We have a higher bottom and higher top in place.
  • Last week formed an Up week (a week with a higher high and a higher low than the week before) closing marginally above the open and just above the low indicating buyers were overcome by sellers.
  • The Daily trend is currently Undecided. We have a higher top and a lower bottom in place.
  • Friday formed a Down day (a day with a lower high and a lower low than the day before) closing below the open and up a little from the low.
  • The Double Bottom reversal pattern I was looking at has been replaced with the larger one marked on the chart. We still need to trade above 6031 to confirm the pattern and in the process we would set up a target of 6137.
  • The other possibility is that Thursday’s 6043.4 high is the 3rd top in a potential Triple Top reversal pattern as marked on the chart. For this pattern to be confirmed we would need to break below 5916 which would set up a target of 5789. We can also use the last 2 tops in this Triple Top as a Double Top reversal pattern. This would be confirmed on a break below 5938 setting up a target of 5840. This would put us back on the top of the previous sideways trading range we spent most of 2017 trapped in and an obvious support level.
  • We could just move sideways (dare I say it) inside the range we have established between 5950 – 6030 as I have marked on the chart. After spending so much of 2017 sideways we don’t want to see us finish the year out the same way, if we had a choice. However this could be a real possibility as activity has been thinning out and with the Christmas holidays just around the corner it’s only going to become thinner again.
  • The break above 6000 has been a real let down as we haven’t managed to get on with it other than 52 points or less than 1%. Having said this 5950, give or take, has supported the Aussie market, thus the sideways trading range I just spoke of above. Breaking out above 6052 is a Bullish signal to position long and breaking below 5950 is a Bearish signal to position short, but with possible support around 5850.
  • Seasonally we now enter a Bullish phase and if we are to get a Santa Claus rally Friday (15th) was about the last date to set up the bottom from which the rally starts. This year we have not sold off like we normally do to set this rally up. If we get a rally this would indicate that it may not be as strong or as reliable as its been in years past, so be aware of this if you are looking to trade on the back of this expected rally. A thin market does help the move up if the sellers are on holidays. Volume will not be as a reliable indicator as it normally is over the next 3-4 weeks.
  • Volume on the weekly chart was the largest we have seen since the end of August and even though it shows as an up week it’s a reversal and you will see in the daily volume below it was actually down volume not up volume, which made up a good part of the weekly volume. Volume on the daily chart on Friday was the largest we have seen since XJO expiry back in June for the end of the financial year here in Australia. This is significant because it is 6 months ago and it doesn’t correspond with XJO or stock option expiry. This continues to confirm that the real volume we are seeing is coming in on down days and this is more than likely the true direction we will move in. 

US Share Markets (S&P 500 & DJIA)

US Markets (S&P 500) Weekly Chart – last 2675.81, Friday 15-Dec-17

US Share Markets 181217

Important Points to Note from the Weekly & Daily Charts:

  • 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 above the open and down a little from the high indicating the buyers were in control all week.
  • The Daily trend is currently Up. We have a higher top and a higher bottom in place.
  • Friday formed an Up day (a day with a higher high and a higher low than the day before) closing marginally below the high and above the open indicating the buyers were in control all day.
  • The S&P 500 made a new all-time high of 2679.63 (15th December, 2017) which is 188.76 points or 7.6% above the August 8th top 2490.87 or 278.65 points or 11.6% higher than the March 1st top 2400.98.
  • 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 2485, 2514, 2517, 2544 & 2717. 2667 has acted as resistance over the last week but we are above it and looking like we are still on our way higher towards 2717. Above 2717 I am looking at the following levels 2782, 2832, 2865, 2940 & 2948.
  • If you look at the 3rd last chart in the Appendix you will see that the S&P 500 has been respecting, as resistance, the trend line it’s worked up to. This has been holding back the S&P 500 from running higher and as we have already seen turned the index lower but so far this has only been temporary.
  • Volume on the weekly chart has again been strong and is holding around the level of the previous 2 weeks. The last 3 weeks have also seen larger ranges and these are up weeks. These big moves up with big volume are Bullish. Volume on the daily chart was almost double on Friday compared to the days earlier in the week as this was triple witching (expiry of stock and index Options and Futures) and the last for 2017. With this out of the way there will be a lot of holidays being taken so expect volumes to fall away significantly for the next few weeks.
  •  The daily trend is Up, the weekly trend is Up and the monthly trend is Up.  


Upcoming Dates of Note.

Upcoming Dates of Note 181217


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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.

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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