XJO is continuing heading down and closed lower for the fourth consecutive session. Prices fell below the Fibonacci-area and key pivotal levels discussed in our weekend post. This puts the Daily timeframe back into a confirmed downtrend. Prices found support at the familiar 5890/5900 level and the range is narrowing compared to the previous sessions. The close near the low of the day is weak and most of the bounce after the climatic selloff early February 2018 is given back. Downside pressure remains with the price index producing lower price tops and lower price bottoms. A bounce back above the key pivotal level and 50% Fibonacci retracement at 5965 would trigger a buy signal for the price index. However, we would view a re-test of the 5800 level as a better signal that supply has been spent. The 6000 level is the current battleground for bulls and bears. Mind you, the meaning of this level as a congestion zone for prices is going back 11 years! Australian equities haven’t come far since then and the 6000 level is once again a challenge for prices. Today’s chart is a Monthly chart of the S&P/ASX-200 (XJO). The chart shows the slow uptrend which started after the GFC selloff in 2007/9. Prices remain in an uptrend channel for the long-term uptrend to remain intact. A steeper uptrend channel started after the selloff surrounding the November 2016 selloff and even this uptrend remains intact. The uptrend looks tired with the price top early 2018 remaining below the supply line of those channels. Ending the November 2016 channel would lead to a deeper and probably more prolonged downtrend and even put the long-term uptrend at risk. First things first, the 5800 level offers good support and this level coincides with the demand line of the November 2016 uptrend channel. Resistance at the familiar and psychologically important round number 6000 has to fail to ease from downward pressure. Short-term resistance is at 5965. Market Condition remains in Stage 3.
The NH-NL Index remains negative. All Daily NH-NL indices are in their bearish territory and the Weekly NH-NL is back below its zero line. Today’s down move is hardly felt in the NH-NL Index with Daily NH-NL indices remaining flat. Wile New Lows remained level, New Highs expanded in today’s session but remain below their bullish threshold of +80. The NH-NL Index may foretell a bounce in prices.
The Secondary Market Internals remain negative. The NH-NL Ratio remains at its extended oversold level while its moving average remains falling. This is not a conducive condition for the market. The Volatility Index is rising and remains at higher absolute levels. Market participants are starting to remember again that equity prices actually can go down.
The Breadth Indicator remains negative. The McClellan Oscillator is negative and continues to fall below its zero line. The Summation Index is hardly making any progress above its +600 neutral line. Its current level near the neutral line portrays a message that liquidity is currently not plentiful. Liquidity is the most important fuel to drive prices.
The Bottom Line. The strong bounce after the early February 2018 selloff is almost given back. The three swings in both directions in less than a month are rather erratic. This points to an indecisiveness market. The underlying price trend is down and underlying strength is weak. Market Internals are negative but did not weaken further in today’s session. This may foretell a bounce in prices. Strong support is at 5800 and the psychologically important round number 6000 remains the battleground for bulls and bears. Short-term resistance is at 5965. Trading Mode is downgraded to Protective on negative Market Internals and the Daily time frame in a confirmed downtrend.
We will be travelling in the next two weeks. The next Market Update will be for Tuesday 20 March 2018, prepared after the close of trade on Monday 19 March 2018.
Thank you for your understanding and your continuous support.