Trading Day

The S&P/ASX 200 slumped on the open, but then strongly recovered as the unemployment figures were released but is still down 20 points of 0.5% from yesterday, at 4120 points.

Other Asian markets are experiencing ructions, with the Nikkei 225 down 1.2% at 8922 points, and the Hang Seng down 0.5% at 19687 points.

Other risk assets are mixed, with the AUD stabilising against the USD, now at $1.023

Gold is down after a mammoth run up overnight, now trading at $1788 USD an ounce. WTI crude has stabilised now at $82.69 USD per barrel.

Movers and Shakers
It’s mixed across the board, with only the telco sectors posting positive gains due to Telstra’s 4% move up, ironically on bad results. The banks are generally up, with ANZ up 1.5%, CBA up 0.2%, NAB up 0.3% and WBC up 0.8%. Macquarie continues to fall and is down 3.5% to an almost March 2009 low.

The resource twins BHP and RIO are not taking part in the gains, and are down 1.7% and 2.6% respectively.

Todays Charts

…most investors think that dipping to fair value for a minute and bouncing is normal. It is, in fact, highly aberrant historically. Markets staying down and washing away a whole generation’s false expectations, high animal spirits, and excessive risk-taking – that would be normal.

The quote from Jeremy Grantham> at GMO (see this morning’s post) is apt – are there any more bargain hunters out there to keep this rebound rally going?

Daily chart of ASX200 - lots of overhead resistance to get through

The market has rallied over 10% from its intraday low to today’s intraday high. This is not unusual and the rally could extend even further – remember yesterday how I pointed out that 20% rallies during bear market phases are quite common.

Weekly chart of ASX200 - resistance at 4500 (orange line)

Note on the weekly chart above there is significant resistance at 4500 points – a place where many went long expecting just a “normal” bounce and a place to buy at fair value. But what if fair value is a long, long way below?

Local earnings season continues – today its Alumina (AWC), Aquarius Platinum (AQP), Telstra (TLS) and and update from Singapore Telecom (SGT). Harvey Norman (HVN) and David Jones (DJS) also release sales updates for the last quarter.

Remember to bookmark the overall update here.

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  1. What’s going on today Prince? The US down 4+% and we’re flat at this stage.

    Have the Aussie sharemarket sheeple decoupled for the day and learn’t to make their own judgements?!

  2. The waves of fear and greed are global, we won’t decouple.

    US S&P 500 futures are currently 1144, up from the New York close of 1120.

    Asian markets are mixed. Shanghai up. Korea up. Others down.

  3. We’ve all been too well conditioned since the GFC – we all know Aussie banks are the best, and any financial crisis is just a beaut buying opportunity.

    A colleague of mine was talking about taking $100K off his mortgage and plonking it on the banks because the yields were so good. I tried kindly to dissuade him and point out some of the unsung risks. I haven’t seen him since, but I sure as hell hope he hasn’t done it.

    I suspect there are bargain hunters here around 4100-4200 on the All Ords who won’t be around any more at 3500…

      • He’s a speculator at heart – he recommended me a biotech stock heading into Phase 3 trials, priced at ~6x book. I replied not my kind of speculation (too much downside), and mentioned what I’d consider speculating on – assymetrical payoffs, contrarian and based on fundamentals. I discussed long dated deep out of the money puts on CBA (coincidentally, also at 40 – although I mentioned December 2013), and discussed under what kind of conditions they would pay off. His reply was somewhere along the lines of “that’ll never happen!”.

        I think this trade still has legs, but the premium is a bit steep here for me… I’m too much of a value investor to do well speculating with options in this market. But the volatility is so tempting! (Save me Ben*, Save me!)

        I do hope he doesn’t have an options trading account though…

        *Graham that is, not the other Ben.

        • That’ll never happen?

          When credit was freezing 2008 and the govt hadn’t promised the pillars support (no property crash yet!), CBA went 60s down to mid 20s.

          “Attention all wildebeeste…Attention, all ‘go-getter’ Wildebeeste at the front of queue for the river crossing.”