See charts below with an On Balance Volume indicator and the Money Flow Indicator using a 13 period
Lets talk about the chart of the XAO. One bar does not make a trend IMO. Sure, its got a bearish look to it - this weeks bar, but I repeat, one bar does not make a trend so we need more information to make a bearish or bullish call. Probably the most difficult thing about being a market participant is uncertainty. All we really have is the present because no one knows what the future holds, there is probability and you can manage your portfolio around that, but no one knows whats going to happen. If you want to read a little about my thoughts of "what if" and "don't know" click on the link for a newsletter I wrote back in 2015.
https://www.easysharetradingsystems.com.au/products-and-services/archive/listid-1/mailid-79-what-if
So whats happening in the now? Coming back to the chart we can see its still trending up, volumes are holding and despite this weeks volatility, this weeks low and this weeks close, are still higher than the week before. Also there are 6 stocks making 52 week closing highs this week in the ASX 500, so some stocks are performing well.
Last week I said " Its also a very difficult market to trade because moves up, and down, are fast and unsettling.
And
"So! Have a plan in mind how you will manage your trades ............."
Speaking of plans here is the performance of the eBook system on the ASX 500 the last 12 months. 16% without dividends included.
I acknowledge its not knocking it out of the park, but its not losing either. I checked my recent 3 month portfolio performance last night, up 2 % since late May. It was up 7% , but this week it got knocked around. Its been a tough time and I admit to feeling exasperated as I am sure many are.
Lets look at arguably the most important index. Nasdaq 100.
You can see by looking at the negative divergence of the MFI that the index was overbought - nothing new, analysts have been discussing that for some time and charts don't lie. The price is on support and the OBV is yet to break into a downtrend, if that happens the chart will look weaker. However, in the present, IMO, we have a correction, not a crash. Price could fall to the next level of support and to the previous low on the OBV. Technically speaking the downtrend won't be in play until the low in April 24 is taken out, because that's the last pivot low when analysing a weekly chart. A little disclaimer here.........I am not the best T.A. analyst in the land, others may see it differently, but that's what I see.
One more chart and I am done for today..........
There has been more talk (by myself too) about rotation of stocks out of big caps to smaller caps. Looking at the chart above you can see the more dynamic MFI volume indicator was warning perhaps that theory had got ahead of itself, it was flashing a big divergence. However the OBV is in a solid uptrend and so is the price action. Yes, the chart has past price resistance to work against and it's going to take more belief from investors that the rotation philosophy has legs, that its not a "fly by night" event. The price has pulled back to a 2 year support level so it remains to be seen if it can hold.
Summary: if you don't have a solid system that you are committed to, its probably a good time to sit out for a while and see what happens over the next few weeks. Regroup and re-plan.
I said i was done but I will mention gold stocks.
Similar to the other indexes the GDX in Aus may have got a little ahead of itself, its flashing volume divergence - but the trend is up, the divergence is not that bearish and as I said a few weeks ago I hold core positions in gold stocks and I wouldn't be shorting them!
That's a long read, if you got this far congrats!
Until next week
Peter