Inside the market

Information Technology at highs

The All Ordinaries index was down 0.35% for the week, ending 15 March 2019. The index ended the week 2.6% above its 200 DMA, pulling back from the level of the highs of October 2018. As we said last week, 6,325 is likely to be a point of considerable resistance, and it would not be unexpected to see the index spend some time moving sideways around this level. Any signs of strength above this level would be a positive indication as to the direction of the trend of the overall market.

Of the 472 stocks currently comprising the index (and for which we collect data), 277 of these (59%) ended the week above their respective 100 DMAs, up from 266 (56%) names at the end of last week.  Two hundred thirty-nine stocks were up for the week, while 233 ended the week flat or down. Two hundred and thirty-four shares finished the week within 20% of their 52-week highs, with 77 of those within 5% of 52-week highs.

While the index itself was down for the week, more stocks ended the week up than down and compared to last week while the number of shares within 5% and 20% of 52-week highs remained broadly flat.

Information Technology continued to lead the index during the week, while the Consumer Discretionary group was weakest. Large capitalisation stocks in the Financials sector and the Resource sector were also particularly weak, which is illustrated by the fact that market cap weighted sector performance for both sectors was noticeably softer than the equal-weighted performance.  

Information Technology    

Over the last three weeks, the group as a whole has advanced through and shown multiple tests around the level of the highs achieved in August 2018. A move higher from these levels is now looking likely.

Interestingly, only 6 of the 37 companies that comprise the sector are within 5% of their 52-week highs, and only 16 are within 20%. More interesting still is that 3 of the 5 WAAAX names are still more than 10% below their highs. Either these names will begin to cede their leadership of the sector, or there is still plenty of room for the group to continue to move higher as these stocks start to break through their 52-week highs.

By Danny Sandler

Founder of Ocean Asset Management.