Stock Charts Technical Analysis – Australia and US Stock Market Report 27 Nov 17
Australian & US Market Report - 27-November-2017
The Aussie market looks like it is in the process of establishing a lower top. We reached the Fibonacci 61.8% retracement level (within 2 points) of the last swing down on Wednesday and this was within a day of the 144 day cycle from the May top earlier in the year. This is both price and time resistance coming together at the same time.
Friday morning really helped to confirm this however by the end of the day the Aussie market had recovered almost all of the move down on the day closing slightly below the open and the high. This provides some doubt about the lower top being in place if we continue to push higher moving back above 6000. If we were to do this then we are strong and would more than likely retest the high of 6052 before too long.
Given the lead from the US which thanks to Thanksgiving provided a shorten holiday week. Thursday was closed for Thanksgiving and the Friday was only a half day proving only 3 and a half days in the week just gone. There is a strong seasonal pattern in the US markets around Thanksgiving where they are generally strong into Thanksgiving on the Wednesday and then again on the half day Friday. This is followed by weakness on the Monday of the week following which will be this Monday.
If the normal seasonal pattern holds true this year then this could provide weakness in the US markets which will also help confirm the lower top that we look to have setting up in the local Aussie market. The other thing to note is the Mid Cap and Small Cap markets (locally) are looking like they are beginning to take a breather which could be distribution or consolidation. So depending upon which way these markets break from here will confirm which it is. We should have some answers early this week.
Australian Stock Market (XJO)
Australian Market (XJO) Weekly Chart – last 5982.6, Friday 24-Nov-17
Important Points to Note from the Weekly & Daily Charts:
- The Weekly trend is currently Undecided. We have a lower bottom and higher top 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 down a little from the high which is slightly Bullish.
- The Daily trend is currently Up. We have a higher bottom and higher top 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 but strongly up from the low of the day.
- The high on Wednesday was 2 points shy of reaching the Fibonacci 61.8% retracement level of the recent move down and resistance. This is also a marginal intra-day break of the light blue dotted line which we have seen act as resistance previously. Add to this, it is right on the March 2015 5996.9 top which was the highest level since early 2008 that the market could reach. Along with price resistance we also had time resistance. 144 trading days from the 2nd May 5956.5 top we arrive at 21st November. We were 1 day out which is within tolerance. We have both price and time resistance coming into play together.
- Last week 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 high could be that lower top setting up however gaining so much from Fridays low puts a little doubt into this so we need to see a little more confirmation but the pattern is that of a potential lower top.
- Volume on the weekly chart was less than the previous week and on the low side of recent time. This looks like consolidation or distribution so keep an eye on it. Overall volume is picking up on the down weeks compared to the up weeks which is a sign of weakness. Volume on the daily chart has Wednesday as the highest for the week and it was this day that hit the Fibonacci 61.8% retracement level. Surprisingly the 3 largest range days (Mon, Wed & Fri) saw lower volumes on the 2 down days (Mon & Fri) even more so when you consider that Thursday was Option Expiry and Friday after Option Expiry generally sees a spike up in volume from this which was not the case this month. Overall volume was on the lower side for a normal week let alone Option Expiry week. Next month expiry will be larger as it is the end of the quarter and the end of the calendar year.
US Stock Market (S&P 500 & DJIA)
US Markets (S&P 500) Weekly Chart – last 2602.42, Friday 24-Nov-17
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 at the high indicating the buyers were in control all week.
- 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 higher low than the day before) closing above the open and a little shy of the high indicating the buyers had control.
- The S&P 500 made a new all-time high of 2604.21 (24th November, 2017) which is 113.34 points or 4.5% above the August 8th top 2490.87 or 203.23 points or 8.5% 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. We are now in a position where we can run (above 2544) so be careful of this irrespective if you are long or short.
- If Thursday (16th) is confirmed as a top then we could have a lower Double Top setting up which will need to break below 2557 to confirm the reversal pattern, setting up a target of 2526. We didn’t confirm a top and pushed higher negating the pattern and its target.
- 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.
- On the monthly chart we can see that October was finding resistance on the underside of the uptrend line from the October 2011 bottom which provided support all the way along till August 2015 after which this line has acted as resistance. On the weekly we have held above this same trend line over the last 4 weeks however there is a weekly trend line up from the November 2016 bottom that has been acting as resistance over the last 8 weeks. You can see this resistance clearly on the daily chart as it’s only been able to close above here twice before getting dragged back under it. So far this resistance has been holding. 2 weeks back formed a down week confirming a top but last week made a new high but is still below resistance.
- Volume on the weekly chart was a little more than half that of the week before but this week consisted of only 3 and a half days so this is to be expected. Volume on the daily chart was highest on Tuesday which was the largest range day for the week and fell away strongly for the days which followed. It’s hard to read much into this week’s volume being a holiday shorten week.
- The daily trend is Undecided, the weekly trend is Up and the monthly trend is Up.
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