XAO Technical Analysis

[skc]

Many of the mid-cap stocks that have been performing really well for many months are retracing hard. Impulsive price action lower suggests a larger correction is taking place.

A very notable rotation between the big caps and these formally beast-like mid caps. Apparently lots of large cap managers dipped their toes into the mid cap space to chase performance, and are now reversing course on the back of Trump-inspired large cap rally.

However, the relative lack of liquidity in the mid cap space means that stocks are going down as fast as they went down. If you just zoom out the charts a little bit the sell off actually hasn't been that bad on a 12-month timeframe.

Take IPD... it's down some 40% in last month and a half, which sounds bad. But it's actually only back to the level where it was back in Jul, or 5 months ago.

Same can be said for
- NXT, down ~40% since Sept, and trading at April 2016 levels
- WEB, down 20% since Oct, and trading at Aug 2016 levels
- CL1, down 35% since Sept, and trading at May 2016 levels
- CAT, PME, NAN, DMP etc

 

[Klogg]

A very notable rotation between the big caps and these formally beast-like mid caps. Apparently lots of large cap managers dipped their toes into the mid cap space to chase performance, and are now reversing course on the back of Trump-inspired large cap rally.

However, the relative lack of liquidity in the mid cap space means that stocks are going down as fast as they went down. If you just zoom out the charts a little bit the sell off actually hasn't been that bad on a 12-month timeframe.

Take IPD... it's down some 40% in last month and a half, which sounds bad. But it's actually only back to the level where it was back in Jul, or 5 months ago.

Same can be said for
- NXT, down ~40% since Sept, and trading at April 2016 levels
- WEB, down 20% since Oct, and trading at Aug 2016 levels
- CL1, down 35% since Sept, and trading at May 2016 levels
- CAT, PME, NAN, DMP etc

@skc - probably a question with an obvious answer, but I'm not sure how to find it. But here goes...
Is there a way to separate the market by MC (if I wanted say, all companies b/w $100m and $3bn) and calculate the average drop on these?

I'm curious to see the effect of large cap > mid cap > large cap.

 

[Porper]

. If you just zoom out the charts a little bit the sell off actually hasn't been that bad on a 12-month timeframe.

Totally agree. SGR is a case in point. 25% retracement since late August but it's a blip on the weekly chart. It could even go all the way down to $3.75 (half in value and more from recent highs) and still be bullish longer term. Similar patterns in a lot of stocks...some you mention. But, it does suggest further downside before those longer term trends return.

 

[McLovin]

Totally agree. SGR is a case in point. 25% retracement since late August but it's a blip on the weekly chart. It could even go all the way down to $3.75 (half in value and more from recent highs) and still be bullish longer term. Similar patterns in a lot of stocks...some you mention. But, it does suggest further downside before those longer term trends return.

Surely the arrest of those CWN execs in China had more to do with the fall in SGR than sector rotation?

 

[skc]

@skc - probably a question with an obvious answer, but I'm not sure how to find it. But here goes...
Is there a way to separate the market by MC (if I wanted say, all companies b/w $100m and $3bn) and calculate the average drop on these?

I'm curious to see the effect of large cap > mid cap > large cap.

You can probably easily look at say ASX20 vs ASX200 vs XAO ex-200.

There are probably very different performance between mid-cap miner vs mid-cap oiler vs mid-cap industrial, however, so a sample size that's too large will hide a lot of these big falls. So you might find that ASX20 only outperformed ASX200 by 1.5% (or something that doesn't sound very big).

If you tell me what exactly you want I will see if my platform can export an excel for the information you need.

 

[Klogg]

If you tell me what exactly you want I will see if my platform can export an excel for the information you need.

Thanks for the offer. I'll think about the exact data sets I need then come back, otherwise I'd be wasting your time.

 

[Gringotts Bank]

ASX is broken. Behaving very unusually.

Switching systems off asap.

2017 could be the year everything dies in the ****. Much worse than 2011 if anyone remembers that.

 

[Gringotts Bank]

Jesus Christ this is unbelievable!

DO any of you guys actually trade the ASX with a system? No?

Talking to my self as usual.

 

[skc]

ASX is broken. Behaving very unusually.

Switching systems off asap.

2017 could be the year everything dies in the ****. Much worse than 2011 if anyone remembers that.

Would you like to offer more details to enable some discussion?

The ASX is working fine on my computer.

 

[Gringotts Bank]

Would you like to offer more details to enable some discussion?

The ASX is working fine on my computer.

Mean reversion is completely busted. Worse than I've ever seen.

 

[skyQuake]

Its been quite clear for a while that theres been a rotation from small mid caps to big caps. Some mid caps funds have obviously lost their mandates!

 

[Klogg]

Its been quite clear for a while that theres been a rotation from small mid caps to big caps. Some mid caps funds have obviously lost their mandates!

SKC's list of 'shockers' (the more recent ones anyway) definitely back this up - as does my portfolio.

 

[Gringotts Bank]

Bigs don't revert, and TF doesn't pay, so that's me out. Looking to short the bejesus out of the index.

 

[skyQuake]

Bigs don't revert, and TF doesn't pay, so that's me out. Looking to short the bejesus out of the index.

Why would u want to fight the move? If its really a huge mandate change or a wall of super money being deployed the big caps can really go at it!

 

[Gringotts Bank]

Why would u want to fight the move? If its really a huge mandate change or a wall of super money being deployed the big caps can really go at it!

Because I'm in revenge mode. I just have to step right away.

 

[barney]

Looking to short the bejesus out of the index.

PS I hear your frustration Gringo! Short I agree but looks a bit early at the moment?? ...... what levels are you looking at .... about 40-50 points higher from here looks interesting in the short term given the 4:3 weekly ratio but timing with Xmas/time of year doesn't quite feel right at the moment to me ...... i am a Spec trader however so take my ramble with a grain of salt

 

[Wysiwyg]

Its been quite clear for a while that theres been a rotation from small mid caps to big caps. Some mid caps funds have obviously lost their mandates!

Ahhh. That explains it. I was annoyed how half my watchlists were facing resistance while the Index rises. Example with the S&P/ASX 50 and the S&P/ASX MidCap 50. Could be at a decision point for the MidCap. Trend Up or Down?

 

[skc]

Bigs don't revert, and TF doesn't pay, so that's me out. Looking to short the bejesus out of the index.

Perhaps big don't revert means they are trending... take a bank or insurer and you have some pretty good trends. So trend following pays in the right space. On the other hand, what we seeing is mean reversion over longer timeframes... as SkyQ mentioned in the mid cap space, but also in goldies vs oilers.

The index tends to be quite strong over this Xmas / NY period. Apparently the day to get short is after first week of Jan.

 

[Gringotts Bank]

PS I hear your frustration Gringo! Short I agree but looks a bit early at the moment?? ...... what levels are you looking at .... about 40-50 points higher from here looks interesting in the short term given the 4:3 weekly ratio but timing with Xmas/time of year doesn't quite feel right at the moment to me ...... i am a Spec trader however so take my ramble with a grain of salt

Not sure mate. I've sort of gone a bit numb, which is what happens to me when a lot of hard work gets eroded suddenly.

Perhaps big don't revert means they are trending... take a bank or insurer and you have some pretty good trends. So trend following pays in the right space. On the other hand, what we seeing is mean reversion over longer timeframes... as SkyQ mentioned in the mid cap space, but also in goldies vs oilers.

The index tends to be quite strong over this Xmas / NY period. Apparently the day to get short is after first week of Jan.

Yes, longer, but also much weaker. So it's still not worth playing MR at the moment, imo.

 

[Kryzz]

The index tends to be quite strong over this Xmas / NY period. Apparently the day to get short is after first week of Jan.

Hi SKC - do you have any stats on this?

I tried doing some numbers myself and wanted to see I was on the right track :1zhelp:

I couldn't see any notable difference in terms of performance between the first and second weeks of January. Looks like the first few weeks as a whole over the past 7 years aren't too promising (xjo stats).

Thanks