See charts below with an On Balance Volume indicator and the Money Flow Indicator using a 13 period
A down bar, but one bar does not make a trend. The rally in commodities, particularly gold continued. Bear in mind it was another 4 day trading week being post the Easter break. Not much to say except let's see what next week and a full 5 days trading can show. This week was one of uncertainty and positioning as money continues to rotate around the sectors looking for the best opportunities (which appears to be commodities).
In the US on Friday, the markets recovered a little of their losses from earlier in the week. The markets are still trending strongly and it wouldn't surprise me to see more upside from here, even though the markets look over bought. One would expect fireworks in some of the junior gold and resource stocks next week as they play catch up to a rampaging gold and copper price. The gold price also looks over bought, but if FOMO kicks in - and I have a feeling it may - then it's probably the sector to look at for continuation set ups. Be careful though as many gold stocks have already rallied 30% or so and when they reverse they do so very quickly. Control risk and perhaps set wider stops, as gold stocks swing around more than others. You need to preserve capital and sanity.
ps: its probably worthwhile reading last weeks comments regarding the resources rally
Until next week
Peter
MARKET COMMENTS: As of the close on Friday 28/3/24: (Easter Thursday 28th was the last trading day of the week)See charts below with an On Balance Volume indicator and the Money Flow Indicator using a 13 period
Inflection point that I discussed for the last 2 weeks was clearly resolved this week. The price of the index went up. There was low volume, no doubt some of the reason was the 4 day trading week, and people shooting through early from work on Thursday for the holiday break. However it could also be a lack of conviction? A concern the market is overbought?
The true and steady (although at times lagging) OBV is clearly up, however the more dynamic (yet not always accurate) MFI is still pointing down and showing a negative divergence compared to the price. Is that a worry? It's too early to tell, also as I mention often, this index at times is not a true reflection of whats happening amongst sectors within the market. Money appears to be rotating back into resources, you can see that with the rally in the big mining stocks like BHP, RIO, FMG etc. Some sectors such as I.T. , Health and Consumer Discretionary are either taking a break or slowing as money rotates back into Materials, Resources, Utilities, Oil, Copper and Gold. Since the Covid rally stalled in late 2022 Consumer staples has performed poorly as people return to "normal" and risk on takes over risk off.
So it's a very interesting time, if the markets globally are overbought and there are concerns about growth - then why the rotation into stocks that supply the basics of growth? One of the biggest bull markets we had on the ASX was when miners rallied hard between 2003 and 2008 (before the famous GFC crash) . See chart below of the benchmark miner - BHP
After rallying from $10 in 2003 to $25 and then falling to $20 in 2007, many thought it was all over for the big Australian, but then it rallied to nearly $40 before the GFC. Many believe we are in the final stage of a bull market - Stage 3. The final and most aggressive move up. So over the final stage can BHP almost double again from around 40 to 80? Also what will that do to the small and mid cap miners? If you were trading around the early 2000's you will remember the explosive returns that some of those stocks achieved.
As mentioned last week keep an eye on the Russell 2000 in the US, also the GDX - the gold miners index, if these continue to rally and FOMO kicks in we could be having a repeat (to some degree) of 2003 to 2006, or more likely 2006 to 2008. A two year rally will take us to 2026, the year that many believe will be the end of the long term 18 year cycle that started in 2008. See link below for more info about that.
https://propertysharemarketeconomics.com/18-point-6-property-share-market-economics/
Food for thought (and research)
Happy Easter
Until next week
Peter