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Resources, materials, IT and gold all drove the market higher this week while Consumer Discretionary, Energy and Health all fell. Whether you made a profit this week or not probably depended on not only the sectors you favoured but also whether you held your nerve after the big falls of the prior week and Thursday this week. Certainly, Thursday had me thinking that the news of global inflation, rising interest rates and potential recession combined with fall real wages locally was likely to drive the market lower.

With the election over (well votes are still being cast as I write this) some uncertainty will be removed from our market, but it seems that businesses relying on ever increasing consumer consumption could be in for tough times. You only have to look at the results of US retailers last week to see what is probably coming.

The Nasdaq down almost 30% is another sign that the good times for spec stocks are probably on the rocks.

Where to invest (if at all) going forward is going to be problematic in the medium term I suspect and with interest rates rising, cash may soon once again be a potential investment (better than having to pay banks to hold it for you, anyway).

In May 2021 the XAO opened at 7,290 and last week it closed at 7,390 (although it was lower during the week). So after going nowhere for 12 months, what now? I can see the potential for the market to rise out of the sideways pattern it has been stuck in and head for 8,500. However, I also have trouble seeing how that result can be achieved with the economic headwinds the world faces.

At this time I am unable to see any predictive trends or patterns in the XAO and for the time being I’m expecting more of the same soul destroying volatility.

If anyone raced out and bought all my Stocks to Watch that I updated last week they would have made 12% for the week. They all rose bar one, which probably isn’t that surprising when you consider they were stocks selected at a recent bottom in prices where all had charting potential to rise. When the market moved up this week that potential was realised. Due to time constraints I wasn't able to post detailed analysis for my listed stocks last week, however, I have managed to add a couple of items of analysis this week (see the blue hyperlinks on my Stocks to Watch

I’ve dropped CXO from my list this week solely because it has hit weak overhead resistance after rising 18% for the week. I’ve added IMU which, after losing more than 75% of its value has bounced up off underlying support. Will it keep rising? It could and if it does, it might recover a good slice of its losses. However, buying IMU might also be a case of catching a falling knife.

Contact

Robert Norman

Phone: 0428 346 951
Email: robert@sharecharting.com.au

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