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By July 27, 2011November 15th, 2023Market Commentary, Uncategorized

Gary’s Comments

All equity indices in the Overseas Market table below are in short term up trends except for the Shanghai All Share Index.

The short term up trend will remain in tact until new 7 day lows occur. However, most of the indices have completed a lower high which is fine provided they are followed up with a higher low thereby setting up symmetrical triangles which would be bullish in the short term with the odds in favour (no guarantees) of an ensuing breakout to the upside. Of course, a breakout to the downside from a symmetrical triangle would be bearish in the short term.

Most of the major equity indices are in medium to longer term sideways patterns which indicate indecision – indecision that has been around for many months. The DJIA, S&P500, Nasdaq, FTSE100, DAX, Nikkei & JSE-ALSH are in the mid to upper half of the sideways channels whereas the SSEC (China), Hang Seng, CAC40 (French), TSE60 (Canada) and ALL-ORDS are in the bottom half of their sideways ranges, mostly very near to the bottom. The USA equities indices, FTSE100, DAX, TSE60 & JSE-ALSH started their sideways patterns in January / February / March 2011 whereas the ALL-ORDS, SSEC, Hang Seng, Nikkei & CAC40 started their sideways ranges way back in October / November 2009.

The ranges are all pretty wide ranging sideways patterns that have lasted far longer than typical sideways movements might last, again, indicating the indecision hanging around world equity markets. This period of indecision will end at some stage and will resolve itself in a breakout either to the upside or the downside. The odds are that the ensuing trend will be a strong one after such a lengthy pent up period of indecision. Be on the lookout for such a breakout and ensure that you are on the right side of it. See below for the support and resistance levels.

Overseas Markets Report
Index Close % Change Intelledgence
Risk Status
Short Term Trend Long Term Trend
Dow Jones 12501.3 -0.68% LOW Up Up
SP 500 1331.94 0.39% LOW – Neutral Up Down
Nasdaq 2839.96 0.48% LOW – Neutral Up Down
FT 100 5929.73 2.41% LOW – Neutral Up Down
Dax 7349.45 2.18% LOW Up Up
CAC 40 3787.88 2.52% HIGH Up Down
Nikkei 10097.72 2.10% LOW Up Up
Hang Seng 22572.08 3.06% HIGH Up Down
SSE-All 2703.03 -3.36% HIGH Down Down

Gold and Silver have recently both had breakouts above their respective resistance levels; Gold to a new all time high and Silver out of a short term symmetrical triangle above $38. A short term pullback may occur but if not this will indicate a strong is developing again.

Copper is on the rise again after a strong breakout above $420 and a short term sideways consolidation (not a pullback). This looks like a fairly strong move and should challenge its all time high which is just below $465. This should augur well for small cap resource stocks. The Small Resources Index is up 17% since 28 June which is the exactly the day before the Copper price started its recent 10% run from its lows. As I have waxed lyrical for a long long time, there is a strong correlation between the Copper price and small cap resource stocks around the world. Keep an eye on them and if you are prepared to take some risk there might be some handsome profits on offer but be wary of the political and financial headwinds that abound in the USA, Europe and Australia.

Index Close % Change Intelledgence Risk Status Short Term Trend Long Term Trend
Brent Oil 118.28 1.04% LOW – Neutral Up Down
Gold 1616.8 0.98% LOW Up Up
Copper 447.8 0.22% LOW Up Up
Lead 2670 -2.20% LOW Up Up
FX-$-EUR 1.4508 2.54% Neutral – HIGH Down Up
US $ Index 73.474 -2.32% HIGH Down Up
CRB Index 348.75 0.64% LOW – Neutral Up Down
Silver 4069.8 1.19% LOW Up Up
Zinc 2426 1.15% LOW Up Up
FX-$-AUD 1.095 2.10% LOW Up Up
Platinum 1807.2 1.74% LOW – Neutral Up Down

The blue horizontal lines in the chart below denote a support zone in the S&P500 between 1320 and 1300. Price action is not exact and scientific enough to place support and resistance at exact price points hence the definition of a support zone. Price action into this zone is OK but a fall below this zone would be bearish. There is a minor support zone around the 1260 level and a major support zone between 1220 and 1234 (where clustered Fibonacci levels occur). A break down below this major support zone would not augur well for equities. We would analyse ‘where to’ from there if we get there.

On the upside, the main resistance zone is 1360 – 1380, although in the short term a higher low and a new high above 1357 is required. 1360 – 1380 is the upper zone of the sideways range mentioned above. A break above this zone could see the S&P500 head for the 1470 level.

The S&P500 is in a Low Risk state according to SPA3, which has a medium term outlook. The 200 day SMA (blue MA) is still rising strongly and the 40 day SMA (green MA) is flattening out below the current price action. The daily SIROC is rising as is the weekly SIROC which as also crossed above its 5EMA.

Note that the S&P500 is still well outperforming the ALL-ORDS (the RSC chart in the middle graph).

Local Market Report
Index Close % Change Intelledgence Risk Status Short Term Trend Long Term Trend
All-Ords 4646.3 2.35% HIGH Up Down
Information Technology 538.4 2.96% HIGH Down Down
Consumer Discretionary 1303.9 1.80% HIGH Down Down
Materials 13770.2 2.55% Neutral Up Down
Energy 14970.8 2.30% HIGH Up Down
Property Trusts 809.1 0.82% HIGH Down Down
Financials 4177 3.21% HIGH Up Down
Consumer Staples 7680.1 0.34% Neutral – HIGH Up Down
Health Care 8456.9 -0.70% Neutral – HIGH Up Down
Telecommunications 1041.5 -0.12% LOW Up Up
Industrials 3589.7 3.28% Neutral – HIGH Up Down
Utilities 4347.1 -0.03% LOW Up Up

The ALL-ORDS is well and truly near the bottom of its sideways range which is 4500 – 5050. It’s support zone is 4500 – 4600 (red and black horizontal lines in the chart below) and could bounce off (or close to) either of these if the wide-ranging sideways move is to continue. A break below 4500 would be bearish and would need to trade back into the 4500 – 5050 range fairly quickly to constitute a false breakout. A confirmed breakout could see the ALL-ORDS go a lot lower to the next major support zone around 4200 with minor support zones around 4380 and 4295 on the way down.

The odds are that the ALL-ORDS should move higher in its trading range although it first needs to remain above its support zone and make a new short term high above 4717. The recent evidence shows that it would have difficulty doing that without the SSEC (China) also rising. The bottom RSC graph in the chart below shows that the ALL-ORDS has been more closely following the SSEC than the US equity indices.

The 200 day SMA (blue MA) has turned down in the last month and the 40 day SMA is falling and below the 200 day SMA, both bearish indications. The daily SIROC is rising. I would like to see positive divergence between the SIROC and the ALL-ORDS’s next high as a first step to going higher.

In conclusion, the ALL-ORDS has two consecutive inside days (Tuesday & Wednesday this week) indicating indecision and potentially an up day to follow tomorrow. But this will depend on overseas markets.

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 12/07/2011 19/07/2011 26/07/2011 Weekly Move % Top Mover % Gain Transactions
Intelledgence $436,645.30 $441,701.05 $447,861.55 1.39% KZL 10.79% 0
SPA3 Portfolio $445,072.08 $443,629.67 $451,109.97 1.69% WPG 11.88% 0
SPA3 Hedge $522,444.11 $520,209.84 $518,281.63 -0.37% WPG 11.88% 0
SPA3CFD $57,391.74 $57,856.54 $57,425.54 -0.74% AKI 25.71% 0
Compounded Annual Return
Portfolio 1 Year 3 Year 5 Year 10 Year
SPA3 Portfolio 8.53% 3.36% 8.81% 14.87%
SPA3 Hedge 9.96% 1.27% 11.38% 16.25%
SPA3 CFD 0.75% 19.49% N/A N/A
All-Ords 3.15% -2.60% -1.09% 3.70%
All-Ords Accum Index 7.40% 1.66% 3.08% 7.97%

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: 26/07/2011

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