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ASX Market Indices Charts Review: XJO, XMM, XFJ, XNJ & XGD

March 19th, 2014 · Greg Atkinson · 21 Comments

Over the last few months the Australian stock market has moved without any real conviction and appears to have settled within a range between 5100 and 5450. There has been no clear breakout towards 6000 nor has a major correction taken the market down to what I would describe as a buying range.  At this stage it appears difficult to spot any clear trend by looking at the ASX All Ords Index and/or S&P/ASX 200 so I will go one level lower, and look at some key sector ASX Market Indices.

To start with, let’s review the candlestick chart for the ASX 200 Index.

S&P/ASX 200 Index (XJO) 3 Month Candlestick Chart

xjo_3_month_candlestick_chart_mar_2014

I am using candlestick charts simply because they make it easier to spot the days when the market has risen or fallen, plus they are provide a visual indication as to the magnitude or range of movement.

In the case of the ASX 200 chart above, we can see easily the fall-back from around the start of the year to near 5100 and it’s also easy to spot the fairly quick rebound to around 5450 in February.  Now it seems the ASX 200 is on the way down again and if the mini-cycle shown above were to repeat, it should rally back to around 5450 again.

However my view is the ASX is over-bought and therefore I reckon it needs to settle down below 5200 for while.  In the following charts I will outline some of the reasons for this view.

S&P/ASX 300 Metal & Mining Index  (XMM) 3 Month Candlestick Chart

xmm_3_month_candlestick_chart_mar_2014

The Metals & Mining Index is worth watching because it covers much of  the resources sector and for me this chart reflects weakness in this sector. Some “experts” may say there is a silver lining to be found as the resources boom ends, but I’d suggest that’s just wishful thinking.

Also the the prices for many hard commodities are expected to remain under downwards pressure this year, so we probably should get use to mining stocks edging sideways for a while and not being the force driving the ASX 200 higher.

Having said that I would be a buyer if individual mining related stocks fell too far. (I.e. BHP at around $30 or lower for example)

S&P/ASX 200 Financials Index (XFJ) 3 Month Candlestick Chart

xfj_3_month_candlestick_chart_mar_2014

The major banks & finance related stocks rallied quite strongly last year. but when I look at the chart of the ASX 200 Financials Index above I get the feeling the sector will struggle to remain at current levels and may be one of the sectors that drags the wider ASX 200 lower in the months ahead.

S&P/ASX 200 Industrials Index (XNJ) 3 Month Candlestick Chart

xnj_3_month_candlestick_chart_mar_2014

The ASX 200 Industrials Index over the last 3 months has done quite well which is surprising considering how much pressure manufacturers are under and also taking into account the difficulties companies such as Qantas find themselves in.

This Index does cover a fairly broad range of companies so it’s a little hard to read, but it does appear poised for a fall.  In any case it is worth watching  how this Index moves over the next few months.

Finally let’s have a quick look at how gold prices and the gold industry are faring.

S&P/ASX All Ordinaries Gold Index (XGD) 3 Month Candlestick Chart

xgd_3_month_candlestick_chart_mar_2014

The All Ordinaries Gold Index covers the gold industry so it’s a good way to track how both gold prices and gold miners/producers are faring. Clearly the trend over the last three months has been upwards so this must give some reassurance to the gold bulls. I’m not that keen on gold myself at the moment as a long term investment, but if the current trend is maintained then I may start contemplating taking some short term positions.

So in summary my stock market outlook at the moment remains unchanged from what it was some months ago. I believe the ASX 200 is trading above where it should be and that the market is poised (and overdue for a correction).  Clearly if the market rallies and heads up towards 6000 then my analysis of the market was wrong, but at this stage I am inclined to keep  sitting on the sidelines and bide my time.

This article was written by Greg Atkinson who is the Managing Director of Ohori Capital. Greg is from originally from Sydney but now works and resides in Japan. He can be followed on twitter via GregAtkinson_jp


21 responses so far ↓

  • 1 Greg Atkinson // Mar 25, 2014 at 11:06 am

    Looks like the upwards trend for the All Ordinaries Gold Index (XGD) might be coming under pressure. meanwhile the ASX 200 seems to be determined to hold above 5300 but can it finish above that level at the end of this week?

  • 2 Lachlan Scanlan // Mar 26, 2014 at 7:01 am

    Any downside will have to remain limited and some distance from 5300 or the short term signal will become further downside. Looks fair so far though. Metals were nearing a very important resistance area too. Put that together it could spell short term strength in XJO. This gold bull is happy for another sell off into buying territory anyhow, probably as I have stated before.

  • 3 Greg Atkinson // Mar 26, 2014 at 7:46 am

    It might be that the ASX 200 has moved up a notch and will settle into the 5000-5400 range for a while? At the moment the market seems to drift one day to the next with global events, rumours & EU/Asia/US data pulling it up or dragging it down rather than local fundamentals.

  • 4 Lachlan Scanlan // Mar 29, 2014 at 6:20 pm

    Greg as for the gold our Aud price slipped this week as you anticipated and will need to rally next week to maintain the short term bull. XJO finished well enough maintaining its ST bullish composure for now but it is facing a test of resistance here. Should be interesting next couple weeks for both actually Greg.

  • 5 Lachlan Scanlan // Mar 29, 2014 at 6:27 pm

    I talk to a fair number of people in business and currently those people mostly report the feeling that things are harder now than any time since the GFC started.

  • 6 Biker // Mar 30, 2014 at 6:15 pm

    Anthony and Joseph to the rescue, Lachlan!~

  • 7 Greg Atkinson // Mar 31, 2014 at 9:07 am

    Lachlan it certainly will be an interesting few weeks. I wonder how long the market can drift sideways – most/all of 2014 or will a significant trend develop soon?

    As for business conditions, yes it does seem conditions are fairly tough and perhaps there will be a post-commodities boom hangover. Certainly the government has a challenge to repair the damage done by Swan’s resign over the books!

  • 8 Lachlan Scanlan // Apr 5, 2014 at 10:27 am

    Don’t encourage me BP 😉
    Well Greg there’s one interesting week gone. Markets moving higher and gold weak in general. If the XJO keeps up this head of steam and drags the RSI up with to another higher high then 6000 will be looking good just technically speaking. But yeah it’s a wall of worry type thing if your a trader. Which I ain’t these days.

  • 9 Stillgotshoeson // Apr 6, 2014 at 6:44 pm

    I bought some Low Premium Silver last week as much on impulse as anything as I was in town for other reasons and was only a couple of streets away.

    Have two small open orders but have not had the price go down to my buy price yet.

    Gold had a bit of a lift Friday night and back over $1300USD so may have to wait a little longer.

  • 10 Biker Pete // Apr 12, 2014 at 10:56 pm

    From The(ir) Vault: The Asian fascination with gold appears to be alive and well again in the great malls of Singapore. Today I saw Chinese-motifed ingots ‘on sale’ for around A$1710/oz (or S$70,790 per kg). Nice collectors’ items, I guess, but certainly at a premium… .

  • 11 Greg Atkinson // Apr 14, 2014 at 10:41 am

    Lachlan the Australian stock market looks fairly direction-less to me though it is holding up much better than I expected. By now I thought we would be back down in the 4800-5200 range and also would have seen a major correction.

    Having said that, market corrections are frequent and a normal part of market cycles so there must be one brewing someone unless as you say the ASX All Ords/ASX 200 is going to make a run for 6000.

  • 12 Lachlan Scanlan // Apr 14, 2014 at 3:33 pm

    We will get to 5200 quickly Greg if the last 2 days sell off does not turn now because we have the action just fallen to a lower trend line on the rising wedge and we’re also at a key horizontal support here. Failure there will be another snappy sell off. I don’t want to go on a limb apart from my call for 6000 this year sometime, I think it’s at least a worthy consideration. I just don’t have strong faith in any predictions…everything is so turbulent. No real bets in the water then.

  • 13 Lachlan Scanlan // Apr 14, 2014 at 3:37 pm

    Quite a number large founding cattle studs recently foreclosed just lately here in Qld, some have been in the same family lines for over a hundred years. The valuations were lowered. I think your shipping stats are sinking again too Greg if I heard right.
    Just looking again at the xjo…if we bounce hard here then fine but otherwise the 5000 mark will be a good support area for a rally to 6000 if such is destined to be reached this year.

  • 14 Greg Atkinson // Apr 14, 2014 at 7:55 pm

    Yes Lachlan the Baltic Dry Index has well and truly lost its mojo and is now around 1,002. Despite this, there are signs that the shipping sector is picking up but as you say everything is so turbulent.

  • 15 Lachlan Scanlan // Apr 25, 2014 at 6:17 am

    Well there we go Greg. We did bounce hard and the xjo has broken out on the upside. At the same time gold shares suffering more. Will wait’n see now if the xjo can run hard toward 6000.
    NCM may be forming some type of bottoming formation here for a multi-year rally. My New Hope Coal took a dive lower. I picked the wrong time to buy coal no doubt. Oh well not losing sleep, I’m still feeling like a lucky lad.

  • 16 Biker // Apr 25, 2014 at 6:25 pm

    Interesting take on financial matters here, Lachlan:

    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/16/this-4×6-index-card-has-all-the-financial-advice-youll-ever-need/

    The responses are as interesting as the proposal itself… .

  • 17 Greg Atkinson // Apr 26, 2014 at 9:12 am

    Yes Lachlan the market did bounce and bounce higher than I expected but the All Ords/ASX 200 may struggle to hold on above 5500 I reckon.

    You may be right about NCM although I’m inclined to sit back for now and see how the month of May treats stocks.

  • 18 Lachlan Scanlan // Apr 26, 2014 at 11:24 am

    I’ll keep that in mind BP. I think the idea of some cash is logical. It’s based on the reality that none of us have enough information to predict the future. We can make some bets based on our best judgement, cash may ameliorate the impacts of our failure to judge well.

    Greg, BP, for the best part I doubt there is much too worry about in Aussie equities, not unless one needs to cash out shortly. The next dip may be untimely for such a person, it may be.

  • 19 Biker // Apr 26, 2014 at 12:29 pm

    Recognising many of the points on that index card as strategies our eldest son has employed for several years, I ran the card past him, yesterday. He agreed with every point on the card, but commented that the final point was more a socio-political stance than sound financial advice, however much one might agree (or disagree) with the position.

    In respect to ‘necessity to (ever) cash out’, if someone places themselves in that position, we might argue they’re gambling ie., ‘playing’ with money they can’t afford to lose. Why would anyone gamble with their hard-earned? OK, if it’s money well in excess of need, there won’t be a necessity to (ever) cash out.

    And, as many have said here in the past, we really only know who’s swimming naked when the tide goes out… . 😉

  • 20 Lachlan Scanlan // Apr 26, 2014 at 8:07 pm

    Always hoping my competition will die that way BP, nasty I know. I have too little debt to be concerned about and it’s tied to a business with far more value in stock. I’ve been hoarding stock for a while now.
    Talking of tides, I do believe the tide may well go out. I doubt it will be a long lived event. However we don’t want to dry out in the sun like a stranded fish before the waters of life return. I recall you warned me against over-borrowing two years back.

  • 21 Biker // Apr 26, 2014 at 11:23 pm

    Investing in your own sound business is a sensible position, Lachlan. As for tides, they’re regular events.

    During the last five years, we’ve seen a couple of developers hit harder than any individual players. That appears to have passed, although two big players in WA were caught short(less) temporarily.

    While our (on-paper) capital gains have been mild recently, our rents have continued to rise steadily. The question is now to ask where we should allocate (other) spare capital. Index funds continue to attract our attention, mainly because we know so few people who have succeeded buying individual stocks. My father did OK, but the complexities of today’s markets appears (to us) to favour institutional players.

    Unless the tide rises a couple of hundred metres, our B & M is probably safe. Even our more-diversified son admits that, at our age, his plan makes far less sense (for us), than it does for him. A tsunami at our age, employing his strategies, would afford us very little recovery time… .

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