The S&P/ASX 200 opened slightly higher this morning on mixed messages from overnight equity markets, but has now slumped to a 10 month low, at 4447 points, down 0.37%.
Other Asian markets are experiencing smaller losses, with the Nikkei 225 down 0.13% at 9888 points, and the Hang Seng down 0.18% at 22534 points.
Other risk assets are mixed, with the AUD falling slightly from recent historic highs at 1.0984 against the USD, whilst gold holds at $1618 USD an ounce. WTI crude is down slightly to $97.25 USD per barrel.
Movers and Shakers
It’s almost red across the board, but with mixed results across sectors. The banks have minor falls, except CBA which is up 0.2% on good wealth management results.
The resource twins BHP and RIO are providing most of the falls, down 0.5% and 1.1% respectively, whilst my preferred offspring – Cochlear (COH) and CSL – are also down strongly, 2.4% and 1.02% respectively.
Daily and Weekly Charts and Stagflation
As I said yesterday, the ASX200 is at a crucial point. The daily chart shows that today’s fall brings the index down well below the Japanese correction in March and is intra-day below the 20 June low during the May correction. If the market closes the week out below this critical point, the next target for support is 4200 points.
Daily candlestick chart for six months - green line is 15 day moving average
The weekly chart shows that the market has now bounced along this crucial support level for six weeks in a row. The market has had to absorb carbon price news, no rate rise but then higher CPI figures, and now the US debt ceiling debacle.
Weekly candlestick chart for 18 months - black line is 260 day moving average
The normal expectation in a broad correction like this is for support to be found at the next level, roughly 4200 points. However, if the US Congress can sort out the debt crisis, there maybe a rebound rally overnight that wipes out any shorts put on today (for the record, this trader has not added any new shorts, but has been strategically short since May).
It is this sort of confusion that is ruling markets at the moment.