Trading Day: slippery slope

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The S&P/ASX 200 continues to slip, down 12 points or 0.25% to 4585 points, after following Wall Street again overnight. Asian markets continue to sell off, with the Nikkei down 0.32%, the Hang Seng down 0.5% and Singapore down 0.3%.

Other risk assets are mixed, with the AUD down but steady at 1.0672 against the USD, but gold down to $1533 USD an ounce. WTI crude is back above $100, at $100.43 USD per barrel.

Movers and Shakers
The banks generally up, with ANZ and CBA up 0.3% and NAB and WBC just over 0.4%. The major resource stocks are pushing the index down, with BHP down 0.7% and RIO falling 0.45%

Fosters (FGL) is up 5%, whilst Telstra (TLS) reverts back to its trend, now above $3.04 or up 1.7% for the day.

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Correction slips slowly – watch the Yen
The correction in the ASX200 since mid-April continues, with total falls almost 8%. It is still not at the lows experienced during the Japanese earthquake correction, but is approaching them fast. Is there a possible buy zone developing at these sub-4600 point lows or will the index fall further to circa 4200 points?

Daily chart of ASX200 - possible buy zone developing?

The connection with Japan is apt – note the chart below showing a correlation between the AUD/JPY (black) and the ASX200 (green). This correlation has been in place since the lows of March 2009 (and further beyond, but very close since then) – there is a divergence here, as the ASX200 slips, whilst the Yen stays steady – forming a symmetrical triangle pattern.

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AUD/JPY in black, ASX200 in black - note divergence of recent month


Any breakout in Yen is likely to move the ASX200 in a similar direction.