Investors who were looking forward to some New Year optimism dispelling the gloomy note that ended 2014, would have been disappointed with the start to the year, and particularly the last week, when the All Ordinaries fell 161 points or 3%.
The XAO index has formed lower highs since the beginning of September, but the lows have found support at 5120 forming formed a double bottom from which a new uptrend could emerge. A trend line has been drawn which was temporarily broken in late 2014.
The charts of four indices which underperformed in the last half of 2014 are reviewed to assess their role in the poor start to 2015.
I The Energy Sector
The down-trend continues unabated, but the appearance suggests that a double bottom will form if support at 10300 is respected. .
II The Materials Sector Index
Year end price action temporarily penetrated the down-trend line, but the index performed poorly this week, sinking to be about to again test support at 8100.
An evolving double bottom pattern could herald a turn-around in fortunes.
III The Metals and Mining sector index.
This was the worst performing sector of the market in 2014 due to falling commodity prices.
This past week has shown that fortunes have not yet changed for this sector.
In common with the other poorly performing sectors above, the coming week will likely see the index again test support.
Rebound from 5120 would be positive for a trend change to emerge.
IV The Emerging Companies Index
This index rebounded strongly after being sold off for most of the latter half of the year.
Since the start of the New Year, the index has moved sideways, an exception to the other under-performing indices of 2014 which have continued to decline.
Might these smaller cap stocks resume their impulsive move higher as the market recovers lost ground.
In my opinion now is not a good time to sell if you can avoid it. You should hang-on if possible for higher prices in the coming months.