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Inside the market

Consumer Discretionary showing it’s not all doom and gloom

The All Ordinaries index continued its advance during the week ending 26 July 2019 adding another +1.37% for the week. The index is now more than 10% above its 200 DMA. Approximately 63% and 64% of constituent stocks are above their 200 DMA and 100 DMA respectively. 

During the week 67% of stocks advanced. The week ended with two hundred and seventy-nine shares within 20% of their 52-week highs. 111 of those were within 5% of 52-week highs. As we’ve said in the past, more stocks making new highs is an excellent sign of the strength of the market as a whole.

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Inside the market

Broad Industrial advance notable

The All Ordinaries index continued its upward trajectory during the week ending 14 June 2019, rising another 1.66% taking it to levels not seen since 2007. The Materials sector led stocks higher with the S&P/ASX 200 Materials Sector Index increasing 5.2%, followed by the Communications Services sector and the Healthcare sector, each advancing more than 3%.

Of the 489 stocks currently comprising the index (and for which we collect data), 266 of these (54%) ended the week above their respective 100 DMAs. Three hundred and ten stocks were up for the week, while 179 ended the week flat or down. Two hundred and forty-seven shares finished the week within 20% of their 52-week highs, with 100 of those within 5% of 52-week highs.

The Energy sector attempted to push back above resistance, and into the trading range which began in February 2019 however the resistance held and energy stocks were sold lower, confirming the weakness of the sector as a whole.

Consumer Discretionary stocks attempted to break out above their trading range. However, the trading range held with participants coming into the market and driving shares in the sector back down.

There are some solid stocks in the sector such as Aristocrat Leisure (ALL), Harvey Norman (HVN), IDP Education (IEL), Invocare (IVC), Jumbo Interactive (JIN) and Collins Foods (CKF).

However not enough of them to take the sector as a whole to new highs, especially as the heavyweight, Wesfarmers (WES) has begun to break down after attempting to overcome resistance and move higher.  

Communication Services

The Communications Services sector is an interesting one to look at because, while S&P/ASX 200 Communication Services sector index has been on a tear recently, the average of the stocks that comprise the sector has been much less impressive. The reason for this, of course, is Telstra (TLS).

As goes Telstra, so goes the rest of the Communication Services index. A glance at the charts confirms this view. One looks almost indistinguishable from the other.

Looking below the surface, the only other stocks of interest in this sector at the moment are REA Group (REA) and Chorus (CNU).

REA has shown considerable strength in the last couple of months and is now back very close to new highs. If the stock can overcome resistance at this level, it might be able to resume its uptrend. However, the stock might need some time moving sideways in a trading range while the market works through the supply, before it is ready for this next move up.

Chorus has been one of the star performers over the last 12 months. It now appears to be consolidating this strength and forming a trading range. At this stage, the timing and direction of the next move are distinctly unclear; however, how the stock behaves over the next few weeks will give us some clues.

Industrials

In contrast to the Communication sector, we note that 31% of Industrial companies are now within 5% of new 52-week highs. Only the Real Estate sector and the Utilities sector have a higher proportion of stocks within 5% of new highs at 50% and 63% respectively. The industrial sector has made steady progress this year since breaking out of a trading range that it had been in since June 2017.

Leaders in the sector include Austal Limited (ASB), Service Stream (SSM), AMA Group (AMA), Nearmap (NEA), Monadelphous Group (MND) and Cleanaway Waste (CWY). Each of these stocks is within 5% of new highs and as a group they have been under accumulation.

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Inside the market

Cyclicals recovering ground

The All Ordinaries index was up 1.5% for the week, ending 22 February 2019. The index ended the week 2.3% above its 200 DMA and is showing considerable strength following a minor test of the 200 DMA in early February.

Of the 470 stocks currently comprising the index (and for which we collect data), 269 of these (57%) ended the week above their respective 100 DMAs, up from 260 (55%) names at the end of last week.  Two hundred fifty-six stocks were up for the week, while 214 ended the week flat or down. Two hundred and sixteen shares finished the week within 20% of their 52-week highs, with 79 of those within 5% of highs.

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Daily notes

Daily Notes – Accent, Lovisa, Noni B, Wesfarmers

Accent Group (AX1) – Gross margin the driver… Lovisa (LOV) – UK gaining momentum, USA full rollout… Noni B (NBL) – Sales up, profit flat, but on the way… Wesfarmers (WES) – Bunnings solid…

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