Trading Day: 18th July

The S&P/ASX 200 fell over 20 points on the open, reaching the low experience in late June, before rebounding and is now steady just after midday to 4475 points.

Other Asian markets are up, with the Nikkei 225 up 0.39% at 9974 points, and the Hang Seng up 0.54% at 21,993 points.

Other risk assets are mixed, with the AUD down slightly at 1.0611 against the USD, whilst gold steadies at $1593 USD an ounce. WTI crude is down slightly now at $97.11 USD per barrel.

Movers and Shakers
It’s mixed across the board, and mixed within sectors. Amongst the banks ANZ and CBA are losers, down 0.1% and 0.14%, but NAB and WBC are 0.17% and 0.68% respectively.

BHP fell in early trade but has since rebounded, now up barely 0.1% It’s twin RIO is also up 0.61%. Other winners include COH and CSL – up 1.9% and 1.45% respectively, probably on the back of the weaker dollar.

The big winners amongst ASX200 stocks include Sundance (SDL) up 18%, and Gunns (GNS) up 4%
The biggest losers include News Corp (NWS) down another 6%, and other media stocks, including Consolidated Media (CMJ) down 3.3%

Daily Chart
The daily chart shows this correction is back down to critical support at 4450 points, before the small rebound this morning. Direction is slowing down though. This is a bottom pickers market for long-only investors, but remember only monkeys pick real bottoms – this could be like catching a falling knife. However, the more often the market bounces off this support line, the stronger it becomes psychologically.

Daily chart with 260 day moving average and support (orange) lines

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  1. Just thought it would be worth mentioning, i had a look at the previous 60’s – 70s resource driven market.

    The All ords hit a peak late 1960’s, but did not reach its peak again 10 years later in 1979.

    based on this, would expect the 2007 peak to be revisited around 2015-2017 with it being in a bull run probably ending this decade towards the 10,000-12,000 mark.

    So for the next few years, this is definitely going to be a traders market, not a buy hold and hope market. High dividends will again support valuations, but with global inflation on the up, this will push equity valuations lower peaking at the historical bottom of around 6x-7x.

    • I strongly agree with you, Jimbo. The words, “…this is definitely going to be a traders market”, left a profound impression on me — namely because I have always thought this, but haven’t expressed it so eloquently.

    • Researching the Nikkei 225 since their stock market bubble burst is illustrative in that regard Mr Editor….

      Those who have developed nimble trading skills in the last 2 sideway years of the ASX200 will profit the most in the coming years.

  2. As you say, “the more often the market bounces off this support line, the stronger it becomes psychologically”.
    That plays two ways. Makes another bounce more likely, but if the support is eventually breached, it’d likely lead to a strong move down, and provide a strong resistance level from that point onwards.
    Guess we’ll have to wait and see.
    Main market I have my eyes on this week is the EUR/USD. Daily chart moving averages are all set up in such a way as to raise the odds for a strong down move developing.
    Guess we’ll have to wait and see on that also, though today EUR/USD has fallen below Friday’s lows, which could be the start of something bigger.
    If (if) the EUR/USD does make a big move down, I’d be surprised if equities don’t also.

    • Agreed Avid.

      For those who don’t understand support/resistance, if a lot of traders take long positions at or around 4450-4500, but the prices fail to bounce (and therefore that level becomes resistance), whence the index corrects again and tries another bounce, most of these traders will dump their positions back at 4500, to recoup any losses along the way….

  3. Birdy Num Nums

    SDL is up 50% over the last few days with the big jump today coming with confirmation of an offer from China. Speeding ticket? This was always going to happen at some stage given the scale of the project but the sharp run up to the announcement suggest some people were given the nod and wink.

    Given the continued interested of China in Iron Ore and the Acelor interest in the Macarthur bid, it still looks pretty bullish for iron ore and coal.