Trading Day: can’t get no relief

The S&P/ASX 200 slumped on the open and is down over 1% after midday, waiting for the princes at Martin Place to maker their decision. The market is down a total of 58 points or 1.32% at 4439, wiping out most of yesterdays stellar gains.

Other Asian markets are experiencing similar losses, with the Nikkei 225 down 1.32% at 9833 points, and the Hang Seng down 0.52% at 22546 points.

Other risk assets are mixed, with the AUD just below its record high, now at 1.0979 against the USD, whilst gold has recovered back to $1623 USD an ounce. WTI crude is down to $95.21 USD per barrel.

Movers and Shakers
It’s red across the board, with all sectors losing, the financials leading the pack front. The banks are all down 1-2%, with NAB almost down 3%

The resource twins BHP and RIO are also in the party, losing 2% and 1.7% respectively, whilst my preferred offspring – Cochlear (COH) and CSL – are down 1.7% and 2.3% respectively.

Daily Chart
There was no reason to get excited yesterday after all, with the index back below critical support at 4450 points. A rate rise by the RBA is likely to slaughter what is remaining of the bulls. Today’s macro data has added to the demise and the rest of the week’s data has to surprise strongly on the upside to regain the negative sentiment.

Local earnings season is upon us – remember to watch all the updates here.

Comments

    • Agreed. My long term system has been “not LONG” since mid May, and turned short shortly after.

      There is a replication of the patterns and technicals of January 2008, but I still contend the likely action will be similar to the 2001-2003 decline.

      Traders should be studying the N225 to gauge what sort of action we are looking at in the future.

    • I take my trading a week at a time, and therefore don’t take much notice of my own forecasts, but crystal ball gazing is fun too, so here goes…
      I’d argue that the 2008 plunge was swimming against the tide, in the form of the long term bull market / up trend, defined on that chart by the rising 40 month moving average. So in 2008 the rising trend at monthly chart level held prices up, to a degree, though it mightn’t have felt that way.
      I would argue that the down trend which is now just starting has the tide at its back, in the form of a declining 40 month moving average, and so the coming decline could be a lot worse than what we saw in 2008.

      • Away from the charts, what we know now, but didn’t back then, is that the Fed and the ECB will supply as much liquidity as is needed, and will do so at the drop of a hat, not after a few months of plunging asset prices.

        Asset price deflation is the one thing that Bernanke truly believes he has the power to stop, and he will not die wondering in his efforts.

  1. Given that we’re currently at -10% since the start of the year, is now a good time to big up some relatively cheap (but good value) stocks? I’m just starting to read up on value investing and trying to find a good place to put some of my savings for the long term (currently thinking 70/30 split between stocks and online savings account).

    • Jason, if you’re thinking about buying some value stocks, I’d wait until after the earnings season, which has just kicked off.

      Empire Investing (our investment company) through MacroBusiness will be reporting and re-valuing companies as they report over the next month.

      Many good value companies have dropped far more than 10% since the start of the year, so they may be some bargains to be had (and a key focus will be on dividend yield)

      Check out the updates here: http://www.macrobusiness.com.au/2011/07/market-earnings-season/