US & Australian Market Commentary 08 August 2016 - The wider markets are not as strong as seen by the Russell 2000 index

There is a lot of indecision in the markets both locally and in the US currently. This could be an indication of changes taking place and it’s not just on the daily but also the weekly time frames. The larger US indices have risen but not all boats have risen with this tide over in the US. This is a sign that the strength has been isolated in the major indexes. The wider markets are not as strong as seen by the Russell 2000 index. Locally we have reporting season in full swing with CBA reporting on Wednesday 10th and this report by itself will set the scene for the Financial sector if not the market as a whole. The XJO is in a position where I see one of 2 different scenarios playing out. For more on this please find attached this week’s Market Commentary looking at the Australian market and US market.

Australian Market (XJO) Report 08-08-2016

Aussie Market (XJO) Weekly Chart - last 5497.4, Friday 05.08.16

US & Australian Market Commentary 08 August 2016 - The wider markets are not as

 US & Australian Market Commentary -S&P/ASX 200 Chart - 1 Month Candlestick Chart S&P / ASX 200 Chart - 1 Week Candlestick Chart

Important Points to Note from the Weekly Chart:

  • The weekly trend is currently Undecided. We have a higher top and a lower bottom in place.
  • The last week formed an outside week (a week with a higher high and a lower low than the week before).
  • There is a confirmed Inverse Head and Shoulders (marked blue) with a target of 5741.There is an even larger confirmed Inverse Head & Shoulders (marked orange) that has now set up a target of 6137.
  • Last week was the first real weakness we have seen on the weekly chart for the last 6 weeks. Not only did we close below the open, we closed below the low of the previous week, which could be indicating a reversal is taking place swinging the market back down. 

Australian Market (XJO) Daily Chart – last 5497.4, Friday 05.08.16 

Australian Market XJO Daily Chart 050816

Optima S&P / ASX 200 Chart - 1 Day Candlestick Chart

Important Points to Note from the Daily Chart:

  • The daily trend is currently Undecided. We have a higher top and lower bottom in place.
  • We broke higher from the 3 day trading range making the top for the move up from the 27th June bottom. This was a gain of 560 points or 11.1%. It also looks like a false break high as Tuesday and Wednesday fell strongly dropping 146 points or 2.6% which is the most Bearish the XJO has been since the end of June on the back of BREXIT. This was just over the 25% retracement of the move up in just 2 days. The weakening price action from the week before did indicate this retracement was on the cards.
  • Outside of the option expiry (both index and stock) volume spikes we have seen volume on the lower side for the last 5 weeks as we have pushed higher. However on the two days we had down last week volume picked up indicating that there is a little more commitment on the sell side or the Bear side of the market.
  • 5400 – 5425 where the previous tops were formed over May this year is an obvious area where we should expect support to be found as this was the top end of a sideways trading range which lasted the better part of 5-6 weeks.
  • It is looking like the 5155-5141 area is now the key trigger level to watch for confirmation of a larger break down and the place to take action.
  • August is seasonally a positive month but nowhere near as strong as July generally is.
  • Each of the Inverse Head and Shoulders reversal patterns have been confirmed now and with the target of two of them already reached there is still 2 higher targets (5741 & 6137) to go. I have a chart just showing these patterns in the Appendix at the end of the report. 3 weeks back we broke strongly above the Neckline for the largest pattern and this is very Bullish and would indicate the XJO is headed much higher from here. 

Shane is putting together a glossary, or a how to best use this Market Commentary report guide, for those of you who are new to the markets or to Technical Analysis.

If this is of interest to you, please contact Shane.

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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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