So here we are gain, with the local market, the S&P/ASX200 index rejecting the 4300 point level again, slipping down 0.2% to 4277 points:
Note the lower lows in the last couple of weeks. This is not a bullish sign, but only a short term indicator, so highly unreliable.
In my weekly “Trading Week” (posted on Saturday mornings after US/Euro session closed) analysis I reiterated that the local bourse needs to snap above 4300 points level before moving into a new bear market rally or even a cyclical bull market.
Other Asian markets were also mixed from the flat leads on Wall Street last night, with Japan’s Nikkei 225 continuing to rise, up 0.7% to 10,123 points as the Yen continues to fall, whilst the volatile Hang Seng is off around 0.3% to 21236 points. The Shanghai Composite is currently down 0.3% to 2381 points, after losing nearly 3% yesterday, but still above its breakout from its long term downtrend channel.
The AUD traded in a wide range today, and is currently at 1.048 against the USD still looking very weak – and somewhat like the ASX200 to be honest. (Disclosure: I’m still short for a short term trade that may become a larger position)
Gold, after getting pummelled again last night, has put on around $3 in the Asian session, moving to $1647USD per ounce and flat at $1570 per ounce (because of the lower AUD). Note, I’m also short (in USD) the shiny metal, in my short term trading system (with only a small amount of equity at risk due to the overwhelming bullish bias)
I’ll give my thoughts on gold in my Trading Week roundup on Saturday morning, alongside some other opportunities that have popped up during the week.
The ASX8
Regular readers will know I follow the ASX8 (the top four banks and miners) on a daily basis, as they are effectively a big proxy for the entire market – the Houses and Holes. Add Telstra (TLS) and you’ve pretty much covered the major stars (or dogs, depending on your point of view) of the market, as the ASX8 is basically the ASX50 – which follows the ASX200 extremely closely.
Today I want to look at The Big Not Quite Australian – BHP Billiton (BHP) and gold miner Newcrest (NCM).
First, BHP, which remains in a wide trading range, and probably fell today because of the sharp drop in the gold price.
The chart is pretty easy reading – all the lows are at $34 a share, whilst the high has only been hit at $38 has been hit only twice in six months. This is not a bullish position, however the valuation – around $42 or so for FY12, and moving to $48 in the next 2 years IF forecast earnings are met, does look attractive.
My thesis remains that to see a bear market rally, or more importantly, a new cyclical bull market, requires BHP to break $38 a share and move up to its valuation and beyond. This is one to watch for upside and downside risks as a slowing China may put pressure on those earnings forecasts.
Onto Newcrest:
One of my favourite short term “pattern” stocks. Note in the chart above 3 (actually 5 – I’ve deleted the lines) short term classic charting patterns for the gold miner. Funnily enough, I don’t trade patterns – I have 2 momentum based systems that are effectively non-discretionary, but the patterns help me assign a probable risk-reward ratio and hence how much capital to risk. Again, entry is not as important.”
Recently, NCM has a great run up marked by the green trend line, where it failed to break the 200 DMA, and on the back of the fall in gold price, has come back almost to support (the lowest orange line). Like the paper gold price, I don’t see NCM as a core investment, but more a position play. At these prices – if gold remains in its secular bull market – its not bad value, IMO.
But I prefer industrials and mining service companies to the actual miners, so my capital would be elsewhere (again another one of those “Why this stock” questions)
The Futures
The futures are looking mixed going into the European session. US and Euro markets are pointing to flat to slightly higher opens, whilst the local market has lost 5 points to 4270 or so. The market-moving data to watch tonight is US centric, with weekly jobless claims, Philly Fed and Empire State surveys alongside money supply stats.
Let’s see what happens in Market Morning tomorrow.
Disclaimer: The content on this blog should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation, no matter how much it seems to make sense, to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The authors have no position in any company or advertiser reference unless explicitly specified. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult someone who claims to have a qualification before making any investment decisions.