Trading Day: 30th June

The S&P/ASX 200 jumped almost one percent at the open this morning, and has since advanced strongly to 4580 points, up 50 points or 1.1%.

Asian markets are a bit maixed, with the Nikkei 225 steady at 9796 points, and the Hang Seng up 0.95% to 22,271 points.

Other risk assets are also up, the AUD advancing strongly, now at 1.071, whilst gold also stronger at $1511 USD an ounce. WTI crude is up at $94.90 USD per barrel.

Movers and Shakers
It’s mainly green across the board with all sectors advancing. The four major banks are providing most of the gains, with ANZ up 1.48%, CBA up 1.13%, NAB up 1.27% and WBC up 1.15%.

BHP is up almost 1% to $43.56, whilst RIO is up 0.84% to $82.37

In other ASX200 stocks, Paperlink is up 27% followed by Platinum Australia (PLA) up nearly 11%. CSL continues to be bid up strongly, up 2.6% to $33.14 (recently upgraded by Macquarie).

The losers include Gindalbie Metals (GBG) down 4%, nickel miner Minara (MRE) down 2.7% and ERA down 1.5%

Daily Chart
The daily chart has finally shown something different – a breakout from the downtrend channel. There is still significant downward pressure on the index as the next critical level is 4700 points. As I’ve been saying the 4500 points level has switched to support on the back of (another) Greek bailout. Technical indicators only suggest a small rally at this stage, with no confirmation of momentum or directional range.

Daily chart - click to enlarge

Weekly Chart
The end of financial year shows how the last 3 trading weeks have closed on or above the 4500 point line, as shown below. The market has effectively traded sideways between 4200 and 5000 points for the last 2 years, with a mid pivot point of around 4700 points. This is my target for the current rebound rally, if no further stimulus (either QE3 or steady interest rates in EU) is forthcoming.

Weekly chart - click to enlarge

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Comments

  1. I agree with your daily chart view, odds favour a small rally (at most). I’ve drawn my trend lines slightly differently to yours, and I’d say a down trend is in place til the ASX 200 beats 4600.

    Aside from technicals, those with a bearish bias would be nervous that one of smh.com.au’s lead stories today is titled “Stash your cash away, the bear’s here to stay”. Headlines like that favour a rally developing soon!

    • Yes, the weekend AFR had a similar spread.

      The current bullish candle on the XJO is the hallmark of a beginning rally – the only technical indicator that hasn’t confirmed it is my ADX, so I’m not long the index itself (actually have some shorts on)

      I am long some of the banks – but funnily enough if you look past the ASX100, not many companies are rallying.

      Its mainly the banks and the “twins” BHP and RIO – those six stocks are like what, 85-90% of the index?

      On another note, it looks like WOW is finally breaking out from a rounding bottom pattern, with $30 the target. (yes, I’m long WOW too)

    • AFR too. I didn’t realise.
      In the midst of a big bull market, two newspapers conspicuously featuring doom and gloom market stories would be a huge buy signal.
      Right now, given that the larger degree market trend is either down or sideways, I’m not so sure. Could be more of a ‘realisation’ signal than a contrarian buy signal ie. could be a sign that people are finally realising that we are in a bear market.
      Ahhh, that’s all “what if” second guessing. Best just keep my eyes on the charts.

    • The only sentiment I’m watching at the moment is the response to the certainty in the carbon price (which looks like going through next week) which will have huge ramifications for Aussie stocks.

      Already, the renewable energy stocks I’m watching are up 10-30% today on the Green’s news.

      BSL is likely to rebound after a huge selloff, and some of the coal stocks are likely to do so as well.

      How long that lasts is a mystery.

    • I’m glad you’re filling me in on what’s going on. It’s been an age since I looked at the chart of any Aussie stock outside the top 20, and also an age since I watched TV news or did more than just skim the online news site headlines.

      Sometimes I wonder why I don’t resume trading Aussie stocks. Back when I used to trade only Aussie stocks (pre 2005) I had a lot more nice set-ups to choose from, than now when I am mostly trading indexes and currencies.

      But, there’s more to trading than just nice set-ups and nice trends. Also I used to get frustrated with finding a nice short set-up on a stock, but not being able to go short. There’s a limited number of shortable stocks in Oz.

      Importantly, it is easier to manage risk when trading a limited number of indexes and currencies.

      Don’t mind me, just thinking out loud…

      Will be interesting to see if the ASX 200 can breach 4600 today, and close over that level.

  2. Keep in mind, that the ASX 200 has been one of the global best performers in USD over the past 12 months!. In nominal AUD – not that great!

    The bull market in the US S&P 500 still has more to go, however, this will be with moderating gains as we move to an ending of the cyclical bull.

    If this means the AUD moves to the next level of $1.20 (for example), then the ASX 200 will continue to underperform in nominal AUD terms. Having a good pulse on the currency cross rates with the AUD will be critical to ensure success.

    For stimulus meansures, currency devaluations and money supply increases ie QE3, will always be forthcoming until inflation solves the debt burden of many economies.

    On a side note, the ASX 200 is also a function of a greater number of financial related company inclusions over the past 20 years, so in that respect, the financial sector is mirred in a bear market. Also, the benefit of many australian companies that have had the shelter of a low AUD, which in effect has hidden their low productivity, they are now being outted and are going through a structural readjustment.

    Positioning ones portfolio, as crude of a term it is, to ensure maximum leverage to the key bull market stocks, will ensure greatest return.

    AJ