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By May 25, 2011November 15th, 2023Market Commentary, Uncategorized

Gary’s Comments

Plenty of red in the international equities indices but lots of green in the commodities table over the last week. All major equities indices around the world are in short term downtrends.

The S&P500 and DJI indices are holding their major support levels of 1320 and 12400, respectively, but only just. I know that they closed slightly below these levels but technical analysis is not an exact science. There are support levels below 1320 and 12400 that I would classify as fairly strong support levels that would need to hold for the S&P500 and DJI should there be further weakness in these two USA equities indices. These are 1300 and 1280 for the S&P500 and 12200 and 12000 for the DJI. A fall below 1260 for the S&P500 or 11600 for the DJI could turn ugly for equities. Keep an eye on these levels over the next month.

On the upside a break above 1365 and 12835 for the S&P500 and DJI, respectively, are required for equities to head higher.

The recent performance in the Nasdaq Composite is indicating that the downside will be tested over the next couple of weeks in equities indices around the world. 2700 needs to hold on the Nasdaq.

In summary, equities markets are going through a period of nervousness and indecision. If support is found at these levels and equities bounce from here and make new highs this should be seen as an indication of strength for the next few months, at least into September.

Overseas Markets Report
Index Close % Change Intelledgence
Risk Status
Short Term Trend Long Term Trend
Dow Jones 12356.21 -0.99% LOW – Neutral Down Up
SP 500 1316.28 -0.96% LOW – Neutral Down Up
Nasdaq 2746.16 -1.33% LOW – Neutral Down Up
FT 100 5858.41 -0.04% Neutral Down Down
Dax 7150.66 -1.46% LOW – Neutral Down Up
CAC 40 3916.88 -0.63% Neutral – HIGH Down Down
Nikkei 9477.17 -0.94% HIGH Down Down
Hang Seng 22730.78 -0.74% Neutral – HIGH Down Up
SSE-All 2767.06 -3.00% HIGH Down Down

It appears that Gold and Silver have found some support and have bounced from around their 38.2% Fibonacci retracement levels, at least in the short term. It is too early to tell whether their retracements are over. They could make a lower high followed by a lower low which could point to further falls, possibly to their 50% or even 61.8% retracement levels. However, Silver requires a higher high close above $39.50 and Gold above $1526 (which it is very close to) in the first instance to increase the probability of saying that their retracements are over. The Gold chart is looking slightly more positive than the Silver chart at the moment.

Dr Copper is hanging precariously onto it’s major support line at $400. It has ventured below a number of times over the last 3 weeks and really does need to hold this level. A sharp fall below $400 could lead to further weakness and would not augur well for small to mid cap resource stocks around the world. It also would not augur well for economic conditions around the world over the next few months being an important indicator of economic demand.

Oil (Brent Crude) has bounced off a support level of $105, down from a high of $127. Expect Brent Crude to move sideways between $105 and $125 for a a period, possibly even in a narrow range between $110 and $120. A break below $105 would find minor support levels on the way down to the $91 major support area. A break above $127 would indicate higher oil prices, the next target level being around $134.80 and then $147.50.

Index Close % Change Intelledgence Risk Status Short Term Trend Long Term Trend
Brent Oil 112.53 2.31% LOW – Neutral Down Up
Gold 1523.3 2.93% LOW Up Up
Copper 401.3 0.36% LOW – Neutral Up Down
Lead 2421 6.32% Neutral – HIGH Up Down
FX-$-EUR 1.4098 -0.96% Neutral Up Up
US Index 75.882 0.64% Neutral – HIGH Up Down
CRB Index 339.1 0.78% Neutral Down Down
Silver 3612.8 7.87% LOW – Neutral Down Up
Zinc 2108 0.43% HIGH Down Down
FX-$-AUD 1.0556 -0.63% LOW – Neutral Down Up
Platinum 1762.5 0.09% Neutral Down Down

As stated above, the S&P500 is hanging right on its first significant support level, at 1320. The 40 day SMA (green) is still rising and price action has fallen below which is quite normal. The 200 day SMA (blue) is also rising indicating that the long term trend is well and truly up for the time being.

The last SPA3 signal was back in September 2010 (green up arrow) indicating that the S&P500 is still in a SPA3 Low Risk phase, medium term up trend. The same applies to the DJI and Nasdaq.

The daily SIROC is falling and hasn’t yet reached its oversold zone. There has been a trend line break indicating potential weakness and a weakening of the trend.

Key support and resistance levels are mentioned above.

Local Market Report
Index Close % Change Intelledgence Risk Status Short Term Trend Long Term Trend
All-Ords 4708.3 -0.94% Neutral – HIGH Down Up
Information Technology 569.8 0.71% HIGH Down Down
Consumer Discretionary 1392.8 -1.23% HIGH Down Down
Materials 13291.43 -1.33% Neutral – HIGH Down Up
Energy 15891.6 0.29% Neutral – HIGH Down Up
Property Trusts 851.5 0.44% Neutral – HIGH Up Down
Financials 4321 -1.97% HIGH Down Down
Consumer Staples 7783.3 -0.25% Neutral – HIGH Up Down
Health Care 8670 -0.40% Neutral – HIGH Down Down
Telecommunications 1034.5 0.80% LOW Up Up
Industrials 3612.9 -0.36% Neutral – HIGH Down Down
Utilities 4325.9 -0.75% LOW – Neutral Down Up

The ALL-ORDS has underperformed the USA indices over the last month as it has done since mid September 2010.

The 40 day SMA (green) has just turned over while the 200 day SMA (blue) has flattened. Note the difference in shape between these two moving averages on the S&P500 chart and the ALL-ORDS chart over the last 9 months.

The daily SIROC is nearing an oversold zone. Also, negative divergence occurred over the last two market tops on 18 February and 11 April between the ALL-ORDS and the daily SIROC.

Another broadening top (also called a ‘megaphone’) is forming in the ALL-ORDS where the up and down ranges expand, i.e. higher highs and lower lows form. A similar pattern formed leading up to mid April 2010 which lead to a 14.5% fall in the ALL-ORDS over 1.5 months at the hard right end edge of the broadening top. Typically (not guaranteed) there are three higher highs and three lower lows in the broadening top.

This is a bearish pattern but, like every other pattern, doesn’t have a 100% hit rate. For the pattern to continue to form the ALL-ORDS would need to expand its range by making a new low below 4559 to a projected level between 4455 – 4508. Obviously this would not be nice as it would take the ALL-ORDS back into its previous range and wipe another 150 – 245 points off the ALL-ORDS. The last time that we ventured down below 4640 it was caused by the earthquake and tsunami in Japan in March. This time it is normal price action in line with run-of-the-mill not-new-news economic events.

On the upside I would like to see support found at the black support line at 4640 followed by a new high above 4835. This would be the first necessary sign of a turn around. Failing that, a lower high below 4835 when we have our next up leg would not augur well in the short term leading up to the end of June and would indicate further weakness on the Australian equities market.

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 10/05/2011 17/05/2011 24/05/2011 Weekly Move % Top Mover % Gain Transactions
Intelledgence $428,546.83 $430,201.21 $432,717.41 0.58% KZL 15.20% 0
SPA3 Portfolio $468,647.46 $459,854.53 $454,712.37 -1.12% CTP 6.76% 0
SPA3 Hedge $557,004.47 $545,776.79 $555,617.14 1.80% NWH 7.39% 0
SPA3CFD $48,759.00 $48,961.40 $50,667.98 3.49% ACR 6.59% 0
Compounded Annual Return
Portfolio 1 Year 3 Year 5 Year 10 Year
SPA3 Portfolio 11.08% -0.30% 10.28% 15.09%
SPA3 Hedge 18.94% 1.54% 14.76% 17.50%
SPA3 CFD -10.26% 7.1% N/A N/A
All-Ords 6.70% -7.07% -1.18% 3.43%
All-Ords Accum Index 11.06% -2.94% 3.05% 7.70%

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: 24/05/2011

One Comment

  • KEITH BUNN says:

    Many thanks for your info letters Garry.
    We used to contribute to “Intlledgence” is this still available?… was so
    very useful and we learnt a lot.

    Regards Keith Bunn

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