With rumors of a possible “solution” to the ongoing European crisis abounding, risk markets last night had an almightly bounce. The ASX200 is expected to rise over 100 points or 2.5% at the open. Here’s a selection of prices from IG Markets Morning Prices RSS Feed:
The German DAX share index has the hallmarks of a temporary bottom in prices. Note in the chart below that 3 times it has crossed the psychologically important 5000 point barrier, and intraday buying (signalled by the long “tails” below the daily candles) has pushed the close back above this important point.
Friday’s close is technically called a hammer, whilst last night’s big black candle – which “engulfs” the last 2 days of prices is extremely bullish. It is likely that prices will bounce around these levels, however, a break above the upper trend channel, ca. 5500 points would point to a sustained rally.
Across other risk markets, similar chart patterns and oversold indicators are pointing in a similar direction. Importantly, for Australian investors and traders, the AUD/JPY cross (which correlates well with the ASX200 index) has found very strong support at 75 cents, the AUD/USD too has found support at 98 cents (see DFM’s post this morning) and both FX crosses exhibit similar “bottom” behaviour.
But I caution that this is very early days, and no confirmation of patterns, technical indicators or even macro fundamentals has suggested that this is the bottom.