XJO 0.99% 7,896.9 s&p/asx 200

Sunday Smorgasbord. Weekly Report for the week ending 23...

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    Sunday Smorgasbord. Weekly Report for the week ending 23 September, 2016.

    CONTENT
    1. Australian Market: Weekly Performance Charts
    2. Australian Market. XJO - Monthly, Weekly, Daily Charts.
    3. Relativity Charts for Sectors and comments on individual stocks.
    4. Australian Market: Risk.
    5. Summing up.
    AUSTRALIAN MARKET: SECTOR PERFORMANCES IN THE PAST WEEK.


    XAO up strongly +2.26%.

    The only negative sector was Telecomms -0.26% after an extremely poor result in TPG Telecom.

    Three best sectors were: Materials +4.62, Industrials +3.63% and Info.Tech. +2.94%. Health 2.88% was close up behind Info.Tech.

    Besides Telecomms, the other poorly performing sectors (relatively) were Consumer Discretionary +0.33% and Utilities +1.55%. The large caps (50 Leaders) had a great week +3.86% and easily outperformed the Mid-Caps +1.09%

    Four stocks made New 52-Week Highs amongst the top 100 stocks compared to one the previous week.



    70.4% of ASX100 Stocks are above their 200-Day Moving Averages. That's up from 58.2% the previous week. This is a measure of the long-term trend in the market. That suggests that the recent pull-back is now over.



    31.6% of ASX100 stocks are positive on the short term trend measurement indicator, DPO. That's up from the oversold region below 20%. That also suggests that the recent pull-back is over. I'd like to see that figure above 50%.



    XJO, Monthly, Weekly, Daily Charts.

    Monthly Chart:



    With one week to go in September, this is looking much more promising. The monthly candle is a "dragonfly" so we haven't given up much so far this month -0.3%.

    The short term Stochastic (14.3.5) has crossed above the long term Stochastic (50.10.10). The long term stochastic is also rising. That's a bullish profile.

    Other indicators are hovering around their mid-lines.

    Another solid week should make this look bullish.

    Weekly Chart:



    XJO up this week +2.54%. The previous week showed strong intra-week buying although it finished on the negative side. This week's strong finish confirms the bullish tone set up in the previous week.

    Major indicators have all turned up and above their respective mid-lines or zero lines.

    The chart has bounced decisively off the lower edge of its rising channel. That's a bullish development.

    Daily Chart:



    All indicators are rising strongly. None are overbought. So any pull-back is likely to be bought.

    The XJO has had a solid run-up, so some short-term weakness could occur. That should provide a buying opportunity.

    ASX 100 - STOCK RATINGS.

    Momentum is one of those anomalies which throws doubt on the Random Walk Theory of Stock Markets.
    As a general rule, avoid stocks in the weakest sectors, and look to stocks in the strongest sectors. (There are always exceptions.)

    The following charts show the stocks from the ASX100 in each of the ten sectors. Relative Strength is a blunt instrument. Use technical analysis for entry to these stocks.

    Remember that the following charts show "relative strength", i.e., strength of the indices and stocks compared to action in the XJO. Bars above the zero line do not necessarily indicate that a stock or index is bullish - only that it is doing better than the XJO.



    On a 1-Year basis, the strongest sectors are Health, Property and Info.Tech. Info.Tech only has two stocks in the ASX100 and can probably be discounted. Materials has made it into the top group for the first time. Utilities has been weakened by a poor result in its largest stock AGL. XUJ had been one of the strongest sectors for a long time but is now weakening as a result of the AGL performance.

    Utilities.

    Utilities was up this week, +1.55%. Utilities, an interest rate sensitive sector, has been relatively weak since the beginning of August. At that time, it was probably stretched too high, and is now coming back to more reasonable valuations. It is now back to the lower edge of its rising channel, so it is back into a "buy" zone.




    AST is now the best performer in this sector. It's Relative Strength Rating is now above o.35.

    This week, no Utilities stocks are on 52-Week Highs.

    On current prices, AGL pays a dividend of 4%. Other Dividends are: APA 4.9%, AST 5.3%, DUE 7.5%, SKI 5.1%.

    Industrials:

    XNJ up this +3.63% this week.



    The Industrials Sector is home to some of the better performing stocks on the ASX100. Aristocrat Leisure is the standout, Relative Rating above 1.17.

    Seek (SEK) was in the Top Ten Stocks for this month, but a recent heavy fall took it back below the 200-Day MA. So it was discarded. It has marginally improved to be back above the 200-Day MA but still shouldn't be considered.

    Downer EDI and Brambles are next best, but BXB has also fallen below its 200-Day MA so shouldn't be considered.

    Downer pays a dividend of 4.2%.

    Materials:



    Materials was up +4.62% this week. It also bounced off the lower edge of its rising channel. Things have really turned around for the Materials Sector.

    Bluescope Steel continues to be the standout up this week -2.92% and bouncing off its 20-Week MA.

    The Miners are a mixed bag. The best is FMG. It pays a solid dividend of 3.9%. AWC is improving and pays a dividend of 5.8%.

    The two big miners (BHP and Rio) are still not performing well enough to be considered. There's better value elsewhere.

    Financials X-Property:



    XXJ is one of the worst performing sectors on a one year basis. The four big banks are all on the negative side of the ledger. CBA is close to its 52-Week Low. Forget about the big banks until we see some solid improvement.

    The only stock worth considering is CGF - a funds manager.

    CGF is the best performing stock and pays a dividend of 3.3%.

    The banks all pay healthy dividends, but until we see a turn around in their prices, the risk is a bit too high. No stocks from the Financials X-PTY make it into my Top Ten Stocks.

    Health and Information Technology:



    Health remains the best performing Index. Cochlear is the standout. RHC and CSL are next best on a one-year basis. CSL is, however, below its 200-Day MA and should be discarded. After COH, Ramsay (RHC) is next best.

    None of the Health Stocks pays enticing dividends.

    Carsales.com (CAR) is clearly a standout in Info.Tech. Dividend Yield 3.3%.

    Consumer Staples:



    TWE is one of the best performers in the ASX100 on a 1-year basis.

    WES is still the pick of the two big retailers, if you must have one in your portfolio. Wesfarmers made a 52-Week High this week and is worth a thought. WES has been in a wide trading range for most of the past year and might now be breaking upwards out of that trading range. Watch.

    CCL made a new 52-Week High this week and is worth a thought.

    Woolworths recently reduced its dividend payout. That is now 3.6%.

    Consumer Discretionary and Telecomms.



    Consumer Discretionary continues to be a solid performer but some stocks are losing ground. Three stocks are now on the negative side of the ledger, including two gaming stocks, TAH and TTS.
    CWN has come into contention as a possibility, but this week it lost ground while most stocks were up. Not a good sign. Dividend Yield 5.1%.

    DMP is the stand-out. It's a growth stock.

    Dividends for other solid performers are: NVT 3.7%, JBH 3.5%, HVN 5.6%.

    Telecomms have become a depressing sight. XTJ has taken over the wooden spoon as the worst performing sector.


    Telstra remains enticing to the dividend hunter: dividend yield +6%. It is coming off the lower edge of its horizontal trading range, so it might be worth a look. Combined with an options selling strategy it might provide a solid income earner - but there doesn't seem to be much growth in it. It's a special interest stock.
    VOC is now a poor performer and is below its 200-Day MA. This week it was down >9%. Avoid.

    TPM was worse down >20% this week. Avoid.

    Energy.



    Energy was the wooden spooner amongst the sectors, now being supplanted by Telecomms - but is still a sorry sight.

    WPL pays a dividend of 4.5% and Santos pays 5.5%. Those dividends are not sufficient reason for buying a stock in a down trend.

    Property



    Property is worthy of standing alone for analysis. On a one year basis, it is one of the better performers in our market. It has taken a bit of a hit the past few weeks, but is now down at the lower edge of its uptrend channel. For the investors seeking income, it is again worth a look.

    The shopping centre stocks, however, are not performing well. Westfield and Vicinity have now fallen below their 200-Day MA. This is also the case with GPT. Avoid those three.

    DEXUS and GMG are the best performers. Yields are: DXS 5%. GMG 3.4%.

    A diversified, cost effective entry to the sector is provided by ETFs such as SLF. According to State Street Global Advisers, the issuer of the ETF, the SLF Dividend Yield is 4.63%. It went ex-dividend on 29 June. Dividends are paid quarterly.

    Another ETF following the Property Sector is VAP issued by Vanguard. It has a lower management fee than SLF (0.25% v 0.4%) than SLF, so is worth a thought.

    AUSTRALIAN MARKET: RISK


    A ratio I often watch to guage Risk in the Australian market is the Ratio of XDJ:XSJ (Consumer Discretionary to Consumer Staples).

    That Ratio is represented in the above chart by the lower pane.

    XDJ has been performing well, but, Consumer Staples in recent weeks has been performing better.
    If we go back to the end of 2015 (the Santa Rally), we can see that, despite XDJ performing well, the 20 & 50 Day MAs on the Ratio XDJ:XSJ were converging, i.e., Consumer Staples was doing as well as Consumer Discretionary. The negative cross-over 20 below 50 of those two MAs lead to a two-push down movement in Consumer Discretionary, and a corresponding fall in the XJO (see below).



    If we follow a similar scenario this time around, we've already had one push down. We might be looking at a second push down, despite all the positives I've spelt out in the writings above. Caution.

    TOP TEN STOCKS FOR SEPTEMBER:

    The Top Ten Stocks for August returned +1.83% while the XJO fell -2.32%. So far, in the past four months, the Top Ten has consistently and significantly beaten its benchmark, the XJO.

    The Top Ten Stocks for September are: TWE, Cochlear, DMP, JHX, BSL, ALL, S32, AST, SEK, FMG. SEK dropped below its 200-Day MA earlier this month and should have been discarded.

    Summing up:

    The past week has capitalised on intra-week buying the previous week. Prospects look good for the Australian market. Most indices and stocks in the XJO show a positive turn-around and more upside looks likely.

    A welcome development has been the emergence of the Materials Sector into the better performing group of Indices. It's been a long drought for this sector. This might mark the beginning of a bull profile for our market.

    In the very short term, the XJO has probably been a little too strong. Friday might have marked exhaustion on the part of buyers - a big up day on heavy volume (number of transactions). A short term pause seems likely. Then further upside.

    All's well? Yes - except for that pesky XDJ:XSJ Ratio. There's no guarantee that we'll see a repeat of early 2016, but it warrants some caution.

    I expect this week to finish well. After that we're into dreaded October. The first two weeks of which are often bearish.

    RB.
 
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