Stock Charts Technical Analysis – Aussie and US Stock Market Report 04 Dec 17

Stock Market Report 04 Dec 17

Australian & US Stock Market Report 04-Dec-2017

There are big things starting to take place in financial markets across the globe. However the general public will be unaware of what’s going on. The big number one reason for this is that they don’t look at the charts let alone understand what they are saying if they do. The reason I say this is because at the end of the trading day the XJO, the Dow or the S&P 500 was up or down from the previous days close. This provides some information but it certainly doesn’t tell the whole story by a long shot.

A perfect example of this is what took place on Friday night in the US markets. If we look at the S&P 500 we can see that it closed down 5.36 points or 0.2%, so nothing to write home about is it? This is what is reported on the major finance news agencies the difference from close to close. Nothing to be concerned about, just a small retracement that’s all.

However if you look at the chart you can see that the S&P 500 fell 42.06 points or 1.6% to reach the low before bouncing back 36.7 points or 1.4% into the close. This is an overall range of 78.76 points or 3.0% down then back up. Seeing this paints a very different picture doesn’t it? How do you feel knowing the S&P 500 was down 1.6% the largest single day move down since November 2016? Would you pay a little more attention knowing this occurred? Would you look to do things differently with the stocks in your portfolio? I would think you would be giving it more consideration than just thinking it was just down 5 points or 0.2%.

When you see a chart you would immediately pick this up and you would want a closer look at it. This is the market speaking to us if we are prepared to listen to it. Things are not as rosey as they seem at first glance is my takeaway.

I have set the relative comparison chart on the All Ords, the Mid Caps and Small Ords to start from when we started inside the sideways trading range (in the Appendix). It clearly shows what part of the market has been performing over this time and why we should have been, if we weren’t, investing or trading in over this time. This would not be news to my clients.

I want you to pay special attention to the world markets relative comparison chart and the very last chart in the Appendix. That all I am going to say. Time to do a little homework my friends :).

Share Market Technical Analysis

Australian Stock Market Report (XJO)

Australian Market (XJO) Monthly Chart – last 5989.8, Friday 01-Dec-17

Australian Stock Market Report XJO - 041217

Important Points to Note from the Monthly, Weekly & Daily Charts:

  • The Monthly trend is currently Up. We have a higher top and higher bottom in place.
  • November formed an Up month (a month with a higher high and a higher low than the month before) closing half way on the month indicating the sellers were gaining control by the end of the month.  We have only made a 55 point gain above the previous stop back in 2015 so this is still not a convincing break higher.
  • 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 half way on the week indicating buyers and sellers were somewhat balanced.
  • The Daily trend is currently Undecided. We have a higher top and a lower bottom in place.
  • Friday formed an Up day (a day with a higher high and a lower low than the day before) closing above the open and about halfway on the day.
  • We could be in the process of forming a Double Bottom reversal pattern with the bottom on the 24th & 30th November. We still need to trade above 6031 to confirm the pattern and in the process we would set up a target of 6112.
  • The other possibility is that Wednesday’s 6031.4 high is a larger lower top in a developing larger downtrend. This will be confirmed if we break down below the 5916.1 bottom on the 16th November. A break below this level would more than likely see a retest of the top of the sideways trading range down around the 5850 area which also happens to be the 50% retracement of the October move up. If this was to occur over the next 2 weeks this would set up the Santa Claus rally very nicely and would be a set up to position long on the back of.
  • 4 weeks back we made not only a new high for the year but we made the highest high since the GFC overcoming the March /April 5996.9 top and the 6000 point level. This is the highest we have been since January 2008 almost 9 years ago. This is very Bullish for our market and would indicate higher prices to come. However even with Fridays high we are still less than 1.0% above the previous top so I would like to see a little more upside before I would be comfortable that we have broken free and are on the march higher to retest the 2007 top (6851.5). Another 1.0% or so say 6120 would do it. We topped at this level and have come off most of last week indicating this is either a retest before we get on with it or that it was a false break that lasted longer and went further than normal before reversing.
  • If we fail to break through 6052 (the recent top) and get on with it and instead put in a lower top this would be a very Bearish sign and indicate lower prices to come. Wednesday’s high (6031) could be that lower top setting up even though the previous Wednesday looked to have done the same thing. However this looks more likely as we have had the second largest down day since the 6052 top came in which occurred on a big spike in volume helping to confirm this thinking.
  • Volume on the weekly chart was the largest we have seen since the beginning of September and this wasn’t an option expiry week either so this is solid volume. However the week finished halfway indicating that the buyers recovered from the low as it turned out. Volume on the daily chart fills in the gaps from the weekly volume as it was Tuesday and Thursday which saw the highest volume and these were both down days. 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. Mondays are generally the lowest volume day of the week however this week it was Friday and when you look to see Fridays price action is not backed by volume it looks very weak indeed. This is why this is looking a lot more like the larger lower scenario setting up. 

 

US Stock Market Report (S&P 500 & DJIA)

US Markets (S&P 500) Monthly Chart – last 2642.22, Friday 01-Dec-17

US Stock Market Report 041217

Important Points to Note from the Monthly, Weekly & Daily Charts:

  • The Monthly trend is currently Up. We have a higher top and a higher bottom in place.
  • November formed an Up month (a month with a higher high and a higher low than the month before) closing above the open and just shy of the high indicating the buyers have still hold the upper hand.  
  • 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 a Down day (a day with a lower high and a lower low than the day before) closing marginally below the open and way up from the low indicating the buyers turned the tables on the sellers and regained control by the end of the day.
  • The S&P 500 made a new all-time high of 2657.74 (30th November, 2017) which is 166.87 points or 6.7% above the August 8th top 2490.87 or 256.75 points or 10.7% 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. It’s taken a little time but the S&P 500 has been running the last week closing in on the next target level 27172667, which is only 10 points higher than the high on the 30th November, is a potential target and resistance level so keep an eye on this also.  
  • Thursday was Thanksgiving in the US and the market is closed. However there is a strong seasonal pattern around this where the US markets are generally strong Wednesday and Friday, which is a half day, and then generally weak on the Monday following. Well we have pushed up into Friday so we should expect to see weakness to start the week off if the pattern holds true this year. Not true this year as the market kicked strongly higher over the last week.
  • The last week has seen the S&P 500 break above and close above the uptrend line from the October 2011 bottom on the monthly and weekly charts. This could be a false break throw over before reversing, as on Friday we had the largest single down day range we have seen since June 2016 (45 points or 2% from the all-time high). However we recovered the vast majority of this down move by the close of the day. Volatility is making an appearance so you should expect to see more. If you look at the 4th last chart in the Appendix below you will see that this all-time high is spot on the top of a trend line I have been watching and with the big drop the very next day looks like it is acting as resistance as expected.
  • Volume on the weekly chart was the highest since June 2016, more than double that of the holiday shorten week before. We got a big move up and with big volume which is Bullish. Volume on the daily chart was building all week peaking on Thursday which was the end of the month. Surprisingly the volume on Friday wasn’t higher given the 42 point move down in the morning followed by the almost 37 point move back up to close out the day. This is a 79 point move over the day and the biggest day we have seen in the S&P 500 for ages. It just goes to show that the market can move down a lot and very quickly when it wants to but that it can also recover if it’s not the end of the world almost as fast. Welcome to volatility which this market has been missing for some time now. 
  •  The daily trend is Up, the weekly trend is Up and the monthly trend is Up.  

 

Upcoming Dates of Note.

Upcoming Dates of Note 041217

 

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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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