Trading Day

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The S&P/ASX 200 Index closed down 65 points or 1.5% lower to 4232 points after shrugging of the rate cut announced by the RBA. In after hours trading, the index is down another 5 points, with Euro and US markets pointing to similar losses.

Asian markets experienced similar losses, with Japan’s Nikkei 225 down 1.45% at 8857 points, the Hang Seng losing 1.6% to 19536. The Shanghai Composite was the best performer, only down some 0.16% to 2463 points.

In other risk assets, the AUD was sold off after the rate cut, breaking well below 1.05, currently at 104.45 cents USD whilst WTI crude slipped nearly 1%, now at $92.52 USD a barrel.

Gold lost around 0.2% during the Asian session and is currently at $1720 USD an ounce or $1645 AUD an ounce.

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Movers and Shakers
A red board on the ASX today, with all sectors except telco (i.e Telstra) down, materials the worst losing 2.41%

The banks all finished in negative territory, with ANZ losing 1.5%, Commonwealth (CBA) 1.1%, National Australia Bank (NAB) over 2% and Westpac (WBC) down 1.7%.

Macquarie (MQG) also lost over 2%, whilst healthcare stalwarts Cochlear (COH) slipped 2.3%, its “twin” CSL steady. Telstra (TLS) was a ASX20 standout, up 0.3%

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BHP Billiton (BHP) was the big contributor to falls on the ASX today, down some 2.7% whilst Rio Tinto (RIO) lost nearly 3%, gold miner Newcrest Mining (NCM) lost 1% fell during the Asian session.

Fortescue (FMG) only finished down 1.6% and Woodside Petroleum (WPL) lost 1%

Woolworths (WOW) lost 0.59% continuing to hit new lows. It seems an interest rate cut had no effect at all…

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The Charts
I’ve explained since last week that the conclusion of the downtrend from the April high to the October low means we are seeing a range of future possibilities:

  • the start of a new bull market, or
  • the continuation of a bear market rally, or
  • perhaps a bull trap.

Another “dip” today will have more calling to buy these lows on expectations of either choice A or B above. The daily chart below shows the ASX200 has now dropped below the 4300 resistance line, the short term uptrend since the early October low and is now back “on track” on its medium term downtrend.

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The current short term trend is no longer intact but could track sideways from here, staying under resistance at 4300 points, but congesting above support at 4100 points.

We are not out of the woods yet – this has hall the hallmarks of a false breakout – a bull trap. Caution must rule.

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In my opinion, hedged (i.e those who want to protect their portfolio vs hoping for returns) medium to longer term “long” equity investors should still be “NOT LONG” in this environment.

Watch my “Chart of the Day” posts for continued analysis of US, Euro and Asian markets which will lead the way.

www.twitter.com/ThePrinceMB

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