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By April 20, 2011November 8th, 2023Market Commentary, Uncategorized

Gary’s Comments

World equity markets hang in the balance following their respective bounces after the Japanese earthquake and tsunami. Short term trends in the tables below are all mostly down. It is important to note that equity indices had run strongly up until the middle of February and were due for a breather – either a retracement or a sideways movement – before the big falls caused by the Japanese disaster. Since the sharp falls in March, equity indices have returned to levels that would have been a small breather following their run-ups to mid February had the Japanese tsunami not occurred.

The question is will the equity markets rally and rise above their highs from 2 months ago? Or, will “sell in May and go away” apply in 2011 and markets head lower?

In 2010 May was a shocker but over the last 11 years there have been more ‘up’ and ‘sideways’ Mays than ‘down’ Mays. Given a five month run-up from September last year and a two month breather, this sideways movement could continue for a few weeks yet and the longer term trend still be in tact. Typically May has been a bad month following a strong rise into April otherwise May has been a good month following a fall coming into May. The odds are that we won’t have a strong May but may not necessarily have a bad one, just a sideways one, well for most of the month anyway.

Support levels will need to hold for this period to remain a consolidation. A consolidation will be very bullish indicating another breakout on the upside in a few weeks time. If key support levels, as discussed below, don’t hold then this will turn into a retracement and indicate further equities weakness.

Overseas Markets Report
Index Close % Change Intelledgence
Risk Status
Short Term Trend Long Term Trend
Dow Jones 12266.75 0.03% LOW – Neutral Down Up
SP 500 1312.62 -0.12% LOW – Neutral Down Up
Nasdaq 2744.97 0.01% Neutral Down Down
FT 100 5896.87 -1.13% Neutral Down Down
Dax 7039.31 -0.90% Neutral Down Down
CAC 40 3908.58 -1.71% Neutral Down Down
Nikkei 9441.03 -1.20% HIGH Down Down
Hang Seng 23520.62 -1.90% LOW – Neutral Down Up
SSE-All 2999.04 -0.74% LOW Up Up

Gold and silver continue to power on into uncharted territory and the US dollar index continues to head lower, albeit with small bounces along the way. Silver has risen very strongly over the last week following its last breakout above $38.

Oil, too, continues to trend higher since Brent Crude broke above $90 in December last year. $120 is a strong support level for Brent Crude. If that level holds then the next target is $130 being an 88.6% Fibonacci retracement level. If $120 doesn’t hold then a retracement back to $102 could occur.

Copper has been in a sideways move since the end of December 2010 following a strong rise over six months prior to that. 420 and then 410 are strong support levels which must hold. The ASX Small Resources Index has a close correlation to the Copper price so keep a close eye on the Copper price for an indication of when small resource stocks may run again, in Australia and on other bourses.

Index Close % Change Intelledgence Risk Status Short Term Trend Long Term Trend
Brent Oil 121.33 0.34% LOW – Neutral Down Up
Gold 1495.1 2.85% LOW Up Up
Copper 422.95 -3.51% Neutral Down Down
Lead 2720 -7.45% LOW – Neutral Down Up
FX-$-EUR 1.4337 -0.98% LOW Up Up
US Index 75.029 0.24% HIGH Down Down
CRB Index 360.83 0.50% LOW – Neutral Down Up
Silver 4391.3 9.60% LOW Up Up
Zinc 2374 -4.89% Neutral – HIGH Down Up
FX-$-AUD 1.0524 0.81% LOW Up Up
Platinium 1771.3 -0.17% Neutral Down Down

The S&P500 is trading around its S40 moving average and in the short term is undecided. Key levels to keep an eye on are 1300, 1320 and 1340. 1320 is a long term support / resistance line dating back to 2006. 1340 is a short term resistance area that must be breached for this equities market to continue higher.

The S&P500 is getting cornered at the hard right hand edge and I would expect a breakout above 1320 or a fall below 1300 in the week or so.

If a fall eventuates then 1220 is a strong support level dating back to 2004 and it is also the 61.8% retracement level of the GFC fall.

If a breakout eventuates then a run-up to 1381 is the first target.

Local Market Report
Index Close % Change Intelledgence Risk Status Short Term Trend Long Term Trend
All-Ords 4874.3 -2.32% LOW – Neutral Down Up
Information Technology 569.3 -1.84% HIGH Down Down
Consumer Discretionary 1471.4 -0.11% HIGH Down Down
Materials 14103.38 -4.35% LOW – Neutral Down Up
Energy 16652.6 -3.19% LOW – Neutral Down Up
Property Trusts 845.5 -0.27% Neutral – HIGH Down Down
Financials 4485.6 -1.12% Neutral Down Down
Consumer Staples 7802.6 -0.12% Neutral Down Down
Health Care 8879 -1.44% Neutral Down Down
Telecommunications 967.2 1.10% HIGH Down Down
Industrials 3606.7 -2.74% HIGH Down Down
Utilities 4229.6 -0.45% Neutral – HIGH Down Down

Both the S&P500 and All Ords have a daily SIROC that has turned over and crossed below its moving average. Both or these SIROC peaks have resulted in negative divergence indicating potential weakness. However, divergence does have a high failure rate but a high enough success rate that still demands that analysts take note.

The All Ords has fallen to its declining S40 moving average where it has found support a number of times since mid 2010. For this market to go higher it really does need to find support at these levels. 4865 is a key support level in the medium term, being the 78.6 Fibonacci retracement of the 15% fall in the All Ords in April/May 2010, and an area where the All Ords has experienced support and resistance a number of times since November 2010.

5050 is still the breakout level to rise above. A higher low at current levels and then a rise above 5050 would be a positive move.

The SPA3 public portfolios continue to outperform the market by a large margin. See the performance table below that shows the comparative compounded annual returns.

Portfolio Summary
Portfolio 5/04/2011 12/04/2011 19/04/2011 Weekly Move % Top Mover % Gain Transactions
Intelledgence $451,990.01 $447,526.99 $434,958.66 -2.81% SIP 4.17% 0
SPA3 Portfolio $504,057.98 $507,550.25 $491,897.91 -3.08% NST 10.98% 0
SPA3 Hedge $574,392.43 $584,323.74 $568,199.21 -2.76% ALK 14.45% 0
SPA3CFD $55,667.58 $55,387.59 $53,405.60 -3.58% NTU 21.50% 0
Compounded Annual Return
Portfolio 1 Year 3 Year 5 Year
SPA3 Portfolio 8.48% 7.89% 11.81%
SPA3 Hedge 11.21% 7.30% 15.11%
All-Ords -1.69% -2.99% -1.02%
All-Ords Accum Index 2.29% 1.27% 3.16%

Share Wealth Systems provides more detail on all of the above items at our eUGMS. The eUGMs are monthly multimedia presentations available to Share Wealth Systems members only.

The figures used in this Active Investor are based on data prices as of: 19/04/2011


  • Ray Hazelhurst says:

    Thanks Gary

    That is very helpful.

    Have a super Easter weekend.



  • jock holland says:

    A question and pardon my lack of knowledge. For %age change numbers what is the change from – past week, past month ?

    Regards Jock Holland

  • Hi Jock,

    All the % Change figures above are based on the weeks move. With the above data based on 19/4/2011 data, it is % change from 12/04 to 19/4.


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