CanOz
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XAO Technical Analysis
- Thread starter Sean K
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tinhat
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Thanks CanOZ, don't want to be the party police but this is the analysis thread - charts and random lines chaps. The XAO banter thread is the chew the fat thread.
CanOz
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Ooops, sorry no random lines
tinhat
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Fear not, I present for your consideration some random lines.
My question to the tech analysts is this. We are hearing banter from the commentariat about the huge amount of money "still sitting on the sidelines" and that is supposedly coming into the market in what is suppose to be "the great churn". Looking at the weekly chart of the XJO we can see that while volumes rose all the way through the boom and crash and bounce of 2006 to mid-2009, since then volume has been falling (I meant to chart the XAO but did the XJO instead). Volumes on average seem to have fallen even since the Greek Debt Crisis slump of mid last year.
Does anyone have any thoughts on this? Should we be expecting to see volume pick up if this bull run is to continue further into the year? Should we accept that the rise in volume associated with the last boom/bust is something that we won't see again for quite some time?
Trembling Hand
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No actually the volume is very healthy. You cannot compare current market (gentle Bullishness) to crises levels. That was "unhealthy" volume as people lost their heads and dollars. You don't want to see that volume again if you are long.
Trembling Hand
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ATR will rise by 20 % if the index rises by 20%.
Not yet as you cannot say that this move has turned to produce a lower high on the indicator....
ld: Tech/A 101 CanOz
CanOz
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@TinHat..........You're basically trying to compare to phases of volume, one increasing and one decreasing with several regime changes...7 maybe? Bull to bear...
To me, the volume on this latest leg of the bull run, compared to other bull run could be more meaningful.
whats even more useful, is if the up days have more or less volume than the down days. IF a rally is to continue it should have more volume to support it....
Volume is still increasing, but so is volatility now, the first warning sign...watch the volume. Once the volume supporting higher prices dries up, the volume supporting lower prices will accelerate.
Interesting discussion.
CanOz
To me, the volume on this latest leg of the bull run, compared to other bull run could be more meaningful.
whats even more useful, is if the up days have more or less volume than the down days. IF a rally is to continue it should have more volume to support it....
Volume is still increasing, but so is volatility now, the first warning sign...watch the volume. Once the volume supporting higher prices dries up, the volume supporting lower prices will accelerate.
Interesting discussion.
CanOz
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CanOz
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CanOz
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Do these so called 'black pools' have an influence on volume also? If they are transacted off market do they even show up?
CanOz
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I'll post a couple of charts of the SPI intra-day with volume as it relates more with price. The SPI is of course the ASX S&P 200 futures contract...still relevant to the discussion but different constituents.
For the sake of the discussion if you accept that "value is where the majority of volume is" then the concepts are easier to understand.
The first chart show the value areas stacked on top of each other....a "trend"
The second chart show where we are now, with value areas overlapping each other, a "bracket"
While this method of analysis does not attempt to predict where the market will go next it does try to give clue where to look for acceptance and rejection of "value". This in turns can give us an idea of which side of the market is less "risky" to be involved in, short or long.
There are overnight "Extended" sessions here (ETH) as well as regular treading hour (RTH). Generally speaking price must be "accepted" in RTH as well as ETH.
The sessions that are wider are ETH and the narrower ones are the regular sessions.
Some notable points are:
A.) This Range extension is a huge counter trend sell off, not typically associated with bull markets
B.) Price made a new high, at the value area high (VAH) of the RTH on the 28th
C.) Price tested the highest volume area (VPOC), overnight and rejected it
d.) Value areas are being formed lower, so value is being accepted lower
as we bracket
**The last overnight (ETH) session is not included but price closed near the 5072 area. I need a custom session template for this contract.
TH - If you have a custom session for the SPI, can you post it? Thanks!
We are not trending any more, we are bracketing, value areas are overlapping and are not stacked on top of each other.
Price can do three things:
1.) We an continue to bracket, testing the extremes of the bracket without finding responsive buyers on the high, or responsive sellers on the lows 5097 and 5045 then 5018. A test of the upper bracket could find responsive sellers and drive the price to the other side of the bracket. Same with the lower side, if we don't find responsive sellers then buyers could push the market to high side of the bracket.
2.) We can test the top of the bracket and find responsive buyers and accelerate higher out of the bracket.
3.) We can test the lower side of the bracket and find responsive sellers and accelerate lower.
So, some key numbers for Monday:
5097 the high
5088 - key level to watch for responsive sellers
5072-75 the mid point
5045 - lower extreme of current bracket
5018 - Untested Value area (VPOC)
The last chart is a range chart showing how the volume dried up on the last push higher....5098
Lets see what Monday brings...
CanOz
For the sake of the discussion if you accept that "value is where the majority of volume is" then the concepts are easier to understand.
The first chart show the value areas stacked on top of each other....a "trend"
The second chart show where we are now, with value areas overlapping each other, a "bracket"
While this method of analysis does not attempt to predict where the market will go next it does try to give clue where to look for acceptance and rejection of "value". This in turns can give us an idea of which side of the market is less "risky" to be involved in, short or long.
There are overnight "Extended" sessions here (ETH) as well as regular treading hour (RTH). Generally speaking price must be "accepted" in RTH as well as ETH.
The sessions that are wider are ETH and the narrower ones are the regular sessions.
Some notable points are:
A.) This Range extension is a huge counter trend sell off, not typically associated with bull markets
B.) Price made a new high, at the value area high (VAH) of the RTH on the 28th
C.) Price tested the highest volume area (VPOC), overnight and rejected it
d.) Value areas are being formed lower, so value is being accepted lower
as we bracket
**The last overnight (ETH) session is not included but price closed near the 5072 area. I need a custom session template for this contract.
TH - If you have a custom session for the SPI, can you post it? Thanks!
We are not trending any more, we are bracketing, value areas are overlapping and are not stacked on top of each other.
Price can do three things:
1.) We an continue to bracket, testing the extremes of the bracket without finding responsive buyers on the high, or responsive sellers on the lows 5097 and 5045 then 5018. A test of the upper bracket could find responsive sellers and drive the price to the other side of the bracket. Same with the lower side, if we don't find responsive sellers then buyers could push the market to high side of the bracket.
2.) We can test the top of the bracket and find responsive buyers and accelerate higher out of the bracket.
3.) We can test the lower side of the bracket and find responsive sellers and accelerate lower.
So, some key numbers for Monday:
5097 the high
5088 - key level to watch for responsive sellers
5072-75 the mid point
5045 - lower extreme of current bracket
5018 - Untested Value area (VPOC)
The last chart is a range chart showing how the volume dried up on the last push higher....5098
Lets see what Monday brings...
CanOz
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chops_a_must
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Volume looks pretty good and pretty comparable with this level previously.
The other thing. I think the volume is from the industry. I'm not sure it is yet retail investors getting in.
Compare the daily posts in the this place now compared to 6-7 years ago. That'll let you know.
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It's not really technical Analysis but it is interesting.
XJO adjusted to currency vs DOW
Who sais theres further catch up?
XJO adjusted to currency vs DOW
Who sais theres further catch up?
white_goodman
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even if there was difference, one is price weighted, other cap weighted
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Just to follow up from this post (post 9026). It seems I was pretty close however the risk to the upside happened a lot quicker than I was expecting and we have really taken off from there. Some 100 days later and the picture is looking a little different.
Firstly the longer term picture:
It's a shame I don't have more data for some of these chart's to provide a little more perspective but I think they still give a pretty good feel.
On a P/E basis stocks are now much more expensive than they were say 12-18 months ago. That's not to say valuations can't run a lot higher as they clearly have in the past, its just one thing to be aware of.
The 'chase for yield' has certainly done it's job as the ASX now yield almost 1% lower (before franking) than it did this time last year.
The 'Risk Premium' of holding stocks is still decently appealing thanks to the RBA's series of cuts in the later months of last year.
When compared to the analysis 3-4 months ago these charts aren't as supportive towards being long stocks. That being said none of them suggest we are 'overbought' and the reward for holding risk does seem to be relatively appealing.
The Weekly XJO brings up the question of seasonality. The old adage of 'don't sell when it drops, sell when it doesn't come back as high' has proven difficult over the last several years because the initial drop has been so severe. We are definitely due for a pullback (although one could have made that argument for a while) yet the high volatility of several weeks ago was met with strong buying support and to me this is a very bullish sign.
The magic oscillator is still not overbought and it hasn't been for a long time. On a longer term basis it does suggest this rally is getting thinner and thinner yet divergences can be very difficult to trade. Until we get a serious overbought level on this chart it points to up.
Firstly the longer term picture:
It's a shame I don't have more data for some of these chart's to provide a little more perspective but I think they still give a pretty good feel.
On a P/E basis stocks are now much more expensive than they were say 12-18 months ago. That's not to say valuations can't run a lot higher as they clearly have in the past, its just one thing to be aware of.
The 'chase for yield' has certainly done it's job as the ASX now yield almost 1% lower (before franking) than it did this time last year.
The 'Risk Premium' of holding stocks is still decently appealing thanks to the RBA's series of cuts in the later months of last year.
When compared to the analysis 3-4 months ago these charts aren't as supportive towards being long stocks. That being said none of them suggest we are 'overbought' and the reward for holding risk does seem to be relatively appealing.
The Weekly XJO brings up the question of seasonality. The old adage of 'don't sell when it drops, sell when it doesn't come back as high' has proven difficult over the last several years because the initial drop has been so severe. We are definitely due for a pullback (although one could have made that argument for a while) yet the high volatility of several weeks ago was met with strong buying support and to me this is a very bullish sign.
The magic oscillator is still not overbought and it hasn't been for a long time. On a longer term basis it does suggest this rally is getting thinner and thinner yet divergences can be very difficult to trade. Until we get a serious overbought level on this chart it points to up.
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..cont
This chart is the big one for me. On a longer term basis everyone knows healthcare/industrials and the heavy weighting of the banks have really outperformed in the last 12 months. Above is the materials and the XSO. The materials are a heavy portion of the index and to me that looks toppy or at best stagnant. ditto the XSO. If these two indexes maintain their current trend then we are relying on less and less stocks to drag us higher. This is supported in the breadth chart above.
So what does it all mean? Who knows. Long term investors have missed the boat in my opinion. That being said if I had to take a position right now I would be long rather than short. Seems to me there is some steam left yet but continued divergence on the breadth coupled with the index constituents slowly falling by the way side are bad signs. Short term i believe its up we go but medium to long term I'm unsure now. a low low on the XFJ would scare the life out of me though.
This chart is the big one for me. On a longer term basis everyone knows healthcare/industrials and the heavy weighting of the banks have really outperformed in the last 12 months. Above is the materials and the XSO. The materials are a heavy portion of the index and to me that looks toppy or at best stagnant. ditto the XSO. If these two indexes maintain their current trend then we are relying on less and less stocks to drag us higher. This is supported in the breadth chart above.
So what does it all mean? Who knows. Long term investors have missed the boat in my opinion. That being said if I had to take a position right now I would be long rather than short. Seems to me there is some steam left yet but continued divergence on the breadth coupled with the index constituents slowly falling by the way side are bad signs. Short term i believe its up we go but medium to long term I'm unsure now. a low low on the XFJ would scare the life out of me though.
chops_a_must
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Some awesome work there!
CanOz
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Agree Kid
Jason Leavitt does the market internal every weel for the US, not dis-similar to your work.CanOz
tech/a
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Getting close now.
Click to expand
And for those who like Geometry.
Click to expand
And for those who like Geometry.