February 22

Market Update for Thu 22 Feb 2018

XJO, once again, sold off at the open but recovered all losses. The price index, once again, closed within a very small range for the third consecutive session. And once again volume was above-average. A lot is going on in the market, judging by the above-average volume. But the market is indecisive by going no-where on above-average volume. There is no more upward follow-through but since prices reached 5940 resistance but there are no downside developments either. Expect more lateral movement before a clear trend emerges. We are of the view that a pullback would be shallow and offer a potential buying opportunity rather than weakness to resume for a deeper pullback to develop. The Chart-of-the-Day is, once again, the same as in our previous reports. The Intraday chart of the S&P/ASX-200 (XJO) shows that the bounce is tired (yellow uptrend line). Prices struggle to make upward progress from the demand line of the uptrend channel which developed from 5800 support. Prices fail to break and hold above 5940 resistance. More resistance remains at 5965 and then 6000. Support should hold at the 5900 level and the key pivotal level at 5870. A close above the psychologically important round number 6000 would turn the Daily timeframe back into a confirmed uptrend and improve the overall negative technical picture. Market Condition remains in Stage 3.

The NH-NL Index remains neutral. Daily NH-NL indices remain in their neutral zone at or below their zero line. Only the 52-Week NH-NL index is making progress. This helps the Weekly NH-NL index to recover back above its zero line and giving a positive message for the market. However, the signal is Intra-week and has to confirm at the close on Friday.

The Secondary Market Internals remain positive and made further progress. The NH-NL Ratio is now well above its 50% neutral line and its moving average rising. Volatility continues to fall, although the absolute level of the Volatility Index remains above the level of the past few months. The early February 2018 selloff brought the concept of risks back to market participants.

The Breadth Indicator remains neutral. The McClellan Oscillator is not making any progress above its zero line but kissing it again. The low readings of the oscillator keep the Summation Index flat. The Summation Index itself remains at its +600 neutral line.

The Bottom Line. Prices recovered back to their means (moving average) in both, the Daily and Weekly timeframe. Prices are holding but there is no further upward progress at the current 5940 resistance. Market Internals remain flat with most market internal indicators at neutral readings. A feathers weight can tip the scales to either side. Expect more lateral movement before a clear trend emerges. Trading Mode is on the brink to be upgraded to Conservative on Market Internals turning positive. For now, Trading Mode remains Protective.