Not the Prince
Trading Day covers the relevant moves in the Asian stock, commodity, debt and currency markets including a review of the top 8 Australian stocks – the top 4 miners and banks, highlighting trading ideas and investment opportunities. Remember to read “Trading Week“, published each Saturday morning, to put these events and ideas in context.
The S&P/ASX200 finished in the red closing a scant 3 points down at 4333 points and continues to reject resistance at 4350 points (the orange line on the chart below, note the “L” marked s is my one and only long entry, using a very small amount of capital in my trading system):
Other Asian markets were very mixed today, with Japan’s Nikkei 225 down 2.2% to 9819 points, the fall possibly due to a very bad storm – worst since 1959 – hitting Tokyo. (Disclosure: I’m no longer long having tightened my position to 10000 points previously) The NZX50 was up 7 points 0.2% at 3480 points. Note the Shanghai Composite and Hang Seng was closed today and won’t reopen til Thursday.
The AUD, which slumped on the RBA rates decision and the FOMC minutes last night was beaten down again today, falling 0.25% to 1.027 against the USD and has dropped below support at 1.035, remaining in its downward trend channel:
Gold had a flat Asian session, before going into the London session, where it has dropped again, now at $1636USD an ounce after falling nearly 2% last night. In AUD terms it was down $18 to $1593 per ounce.
I’m still keeping an eye on the AUD gold price – there could be a long opportunity here brewing even better than following the USD spot price (using the ETF GOLD, which I covered here), but gold is looking weaker and weaker….
The ASX8
I follow the ASX8, the top four banks (ANZ/CBA/NAB/WBC) and miners (BHP/RIO/NCM/WPL), very closely as they are effectively the entire market – the Houses and Holes. Add Telstra (TLS) and you’ve pretty much covered the major stars (or dogs, depending on your point of view) of the market, as the ASX8 is the ASX50 – which follows the ASX200 extremely closely on any chart.
A few to go over today, BHP-Billiton broke out above its short term downtrend on Monday, and retraced slightly today, this breakout so far proving very weak, even as the AUD drops. This reaction was possibly due to the bad trade balance figures released today:
I cover Cochlear (COH) a lot because I think its one of the best companies in the country, which actually invests and creates something productive. I’ve been buying up COH since its recall correction last year in my superannuation, where it is a core holding. I’ve also shorted the stock as a hedging method to protect against further falls, booking the profit to make more purchases, thus reducing my average entry price, thus reducing risk on the position…
Recently I noted that whenever COH approaches its own 200 day moving average – a very closely watched technical level – it was rejected, usually at the same time the AUD rallied. Now with AUD weakness, this export orientated company (like CSL) seems to be going stronger, as it broke above its 200 DMA today, next stop the $63 a share barrier:
Next, given the movement in the gold price, lets look at Newcrest Mining (NCM):
Almost looks like a chart of the AUD doesn’t it? NCM is now approaching its post-GFC lows at $28 per share, finalising a large rounding top pattern. Technically this is not a good picture in the medium term.
One more miner, than I will gloat about two stock picks I got right! As I mentioned before Woodside (WPL) seems to have very strong support at $35 a share:
Its now approaching this again, as it seems WTI crude is weakening, yet Brent is holding firm (see my Morning Macro post for up to date charts). One to continue to watch, and if I had a long position, one to hedge just in case.
On to the two banks I do have long positions (actually just small long trades) – National Australia Bank (NAB) and Westpac (WPC) which I identified recently as trading ideas:
It was the banks that led the recovery on the market later this afternoon, even though ANZ’s CEO said today:
“Banking is going to be more expensive due to the higher costs of funds and higher regulatory requirements,” he said.
“As a result shareholder returns are going to be lower. The leverage effect alone will make it much harder for any bank to achieve the returns, in some cases over 20 per cent, that were common in the pre-2007 environment.”
Banks may end going back to the utilities they should be, based on market forces alone, because I can’t see the macro prudential tools used to force them into robust, less risky institutions that they should be anytime soon. Having said that, opportunities abound as market forces rise and fall on the financial sector….
The Futures
The futures are looking poor going into the European session. US and Euro markets are both pointing to lower opens – around 0.2 to 0.5% down, whilst the local market is down a few points at 4330 points. The market-moving data to watch tonight is Euro-centric again, with EMU services PMI’s, plus UK and German numbers, alongside EMU retail sales figures. After that, the ECB meets and we also get German manufacturing orders before the biggie from the US – ISM non-manufacturing index.
So another deluge of data to absorb before the Easter break which is likely to move markets once more.
Let’s see what happens in Morning Macro, my daily wrap up to start the Asian session, tomorrow morning.
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