Trading Day: the sell off continues

The S&P/ASX 200 slumped again on the open, from the very poor performance of overnight equity markets. The market is now 1.7% or 77 points lower just after midday to 4505 points.

Other Asian markets have similar losses, with the Nikkei 225 down 1.5% at 9914 points, and the Hang Seng down 1.75% at 21,957 points.

Other risk assets are mixed, with the AUD falling sharply to 1.0585 against the USD, whilst gold shoots higher to $1553 USD an ounce. WTI crude is down 0.5% to $94.61 USD per barrel.

Movers and Shakers
It’s deep red across the board. The banks are being heavily sold off, especially Macquarie (MQG) down 4.6%. CBA down 1.7%, ANZ down 1.8% whilst WBC is down 1.5% with NAB leading the sell off, down 2.6%.

BHP is now down 1.7%, at $43.52 and RIO also down 1.8% at $81.62

The only stand out winner amongst ASX200 stocks is Macarthur Coal (MCC), up almost 40% on takeover, with EWC powering ahead, up 8%.

The biggest losers continue to include most of the resource sector, suffering losses between 3-8%.

Daily Chart
The daily chart shows yesterday’s reversal has turned into a “dead dog rollover” today (intraday, this rollover is stark!) with support at 4600 points failing completely. The next target level is approx. 4530 points (the closing low of the Japan Earthquake) and then 4475-4500 points (the lows reached in the recent correction).

My long term system is still displaying “don’t go long here” signals with a weekly close below the 4475 point level changing my market stance to “bear market”, from “sideways market”. Interesting times – and yes, I am short the market and adding…

Click to enlarge

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  1. My 2c:

    – Precious Metals and the bulks likely bottomed in June – could be retest during this voltility. Reassess in august.
    – Gold seems to be forming well. A perfect environoment developing for a seasonal breakout likely against most fiat currencies.
    – AUD vs USD looks interesting. Likely to tread water through the winter months.
    – US SPX 500 near new highs. Bull markets ride a wall of worry!
    – ASX 200 looks interesting. Ashame Australia is bought owned and sold on the hope on the big 4 banks.
    – Anyone for a change of federal govt?!?!?!

  2. The big question for me is do we need to see a move in rate differentials (either dovish Oz or hawkish US move) for AUD to correct? Or will a bout of ‘risk off’ be enough to see a maeaningful pullback? Or will it depend on Aussie banks and house prices??

  3. An interesting question Ben – as these are macro factors I’d ask Deus Forex Machina to answer them, using his 5 factor model.

    From the trading point of view (i.e technical only), using a long term model, the AUD/USD has to fall below approx 1.025 for a meaningful correction, for a target of 97c or even 80c

    A short term short is in the offing on a failure of support at 1.045

    Right now (5pm AEST), the AUD/USD is at 1.055, so not quite there yet.

  4. “dead dog rollover” is a new one for me. Can someone explain it? I’m guessing some relation to the dead cat bounce?

    • Sorry Haymaker, its one of my own concoctions: a dead cat can bounce many times in an ongoing correction – but a dead dog usually just rolls over and stays dead…

      I sometimes have 2 cats with me in my office (they sleep in my chairs, since I work at a standing desk), so maybe the animal aphorisms are a bit too much…..

      IMO, the market has rolled over and is at least playing dead, until the milkie wilkies resume. (search for this expression next….)

      • I was going to say, “The market took longer than I thought it would to start dying again (zombie style, i guess!)”…but then I realised that ~2 weeks from the end of QE2 is really not that long at all…

        Good to see the market is “behaving” a bit more retionally (ie. deflating after a credit-mega-boom, rather than reflating….), and spurring more deflation and destruction of debt….

        ….and, therefore, when will the glbal QEs start again (since nothing else is left to do other than throw out Capitalism (leave that until later, eh?))

        My 2c 😉