The All Ordinaries index put in another solid week with a performance of +1.52% which was a follow-through from the prior week’s breakout. Strong appreciation in the Energy, Information Technology and Industrials sectors drove the robust result. All sector indices contributed positive performance for the week except the Communications sector, which fell 1.85% driven in part by Vocus Group (VOC), whose shares fell 26.6% as a result of AGL’s withdrawal of their bid for the company.
Of the 489 stocks currently comprising the index (and for which we collect data), 275 of these (56%) ended the week above their respective 100 DMAs. Three hundred and four stocks were up for the week, while 185 ended the week flat or down. Two hundred and fifty-one shares finished the week within 20% of their 52-week highs, with 110 of those within 5% of 52-week highs, which is the highest this number has been for some time. As we’ve said in the past, more stocks making new highs is a powerful sign of the strength of the market as a whole.
Despite all sector indices bar Communications being positive for the week, the average of all Consumer Discretionary stocks in the All Ordinaries index was negative. The more significant capitalisation names such as Wesfarmers (WES) and Aristocrat (ALL) were positive for the week, which kept the index positive. However, beneath the surface, there was widespread weakness in the sector, and there are only five stocks (or 10%) in the industry within 5% of new highs, and two of these are funeral providers. This lack of depth does not portend well for the sector.
The Energy sector staged something of a recovery last week with the sector index rallying 3.1%, bringing it back into the trading range that began in February this year. Last week we noted that the sector attempted to push back above resistance, and into the trading range; however, the resistance level held and stocks sold down lower.
On this second attempt, the index was able to work its way back into the trading range. This last few weeks spent below the support level might prove to have been a shakeout for the sector before it begins to move higher again. Time will tell.
The heavyweights of the sector including Woodside (WPL) and Santos (STO) look particularly strong, along with Cooper Energy (COE), however again, below the surface the sector does not look particularly like it is under any widespread accumulation. There are only two stocks (or 6%) that are within 5% of new highs, and they are STO and COE. WPL is 6% from its highs.
The average of the other 20 Energy stocks included in the All Ordinaries is 41% below 52-week highs. For the advance to be sustainable, it’s imperative that it becomes more widespread amongst the smaller names.
The Health Care sector also provided some fascinating action during the week. The Health Care Sector Index was mostly flat for the week, however below the surface, the average stock was up 2.5%. The discrepancy in the performance of the big cap stocks versus the mid-cap leaders is what caused this phenomenon.
While the large-cap stocks drove the previous weeks advance, this week all the heavy lifting was done by the smaller names, which indicates a sector under accumulation.
Of particular note were breakouts by Nanosonics (NAN), Clinuvel (CUV) and Polynova (PNV). Each of these stocks had been resting for various numbers of weeks, but last week each was able to make significant progress.
Gold continued its substantial advance during the week, and a number of the sector leaders, including Newcrest (NCM), Northernstar (NST) and Silverlake (SLK) reflected this. The strength in AUD gold is a reflection of both the weakness of the AUD and the underlying demand for gold.