Another eventful day in the Asian session of the mega-casino that is global financial markets. The local slot machine, the S&P/ASX200, absorbed the news of a new Chinese growth target amidst other data and reports and finished slightly in the red, down 0.25% or 10 points to 4263 points, well below the long running resistance level at 4300.
Other Asian markets are also feeling the heat, with Japan’s Nikkei 225 down 0.8% to 9698 points, the volatile Hang Seng is currently down more than 1% to 21303 points. The Shanghai Composite is currently down half a percent to 2444 points, still above its breakout from its long term downtrend channel.
The AUD is proving resilient again, staying around 1.071 against the USD, where as I mentioned on my weekly wrap-up of major macro markets, the Aussie is trying to break free of this resistance level:
The Yen fell half a percent against the USD in today’s trade to 82.5, as its current breakout looks like slowing for now:
Gold didn’t move much during the Asian session, currently at $1710USD per ounce or $1596AUD per ounce and looking weak for now.
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.
The only one to really note today was ANZ, nudging up slightly, around 0.3% and probably the only major division of Megabank to have any potential gains in the offing. News today that the bank will get a retail license to trade in Chinese Renmimbi was interesting to say the least:
A breakout above $22 per share would be bullish for the Asia-focused bank, but the other divisions, Commonwealth (CBA) National Australia Bank (NAB) and Westpac (WBC) are stalled in sideways funks for now.
To the holes, where BHP Billiton (BHP) and Rio Tinto (RIO) both slumped, probably on the news of the downgrade in Chinese growth. The former lost nearly 1%, the latter over 1% and both remain stuck in a bearish position for now, even though they look very attractive on fundamental valuation basis. BHP needs to break above $39 and RIO above $70 for any meaningful allocation as a position in a portfolio going forward. The dividend yields certainly don’t compensate for the holding cost.
The only other ASX8 I’m looking at today is the outsider – Telstra (TLS) – a former “10 foot pole” stock. After correcting from its mammoth dividend in recent weeks, the telco is now back on track – it seems – in its bullish position. Lots of positive sentiment and expectation around TLS, as current and potential shareholders look longingly at the dividend yield and cash handout from the Fed Govt on the NBN deal:
I contend TLS is only a strategic play, worthy of an allocation in the “Type 2” speculative side of my portfolio.
Trading Idea: Retail
Heres a setup from a previous trade I made, The Reject Shop (TRS):
This was a descending triangle pattern, that technically should have broken the $9 support barrier for another breakdown, but reversed to the upside with a bullish breakout. I entered this on my medium term trading system, with capital at risk calculated at half normal (because in a bear market), and then half again (because contrary signal, a long during a bear market). Once the earnings result was published, the stock continued to break free.
Will we see a repeat with JB Hi-Fi (JBH)? If you look across all the retailers (except Super Retail which is powering ahead) this is the most shorted, but has the best fundamentals, particularly since its major competitor Dick Smith Electronics (owned by Woolworths, for now) has given up the game:
One to watch, but notice it proved the bearish descending triangle thesis true in November last year, and is edging closer below support at $11 per share. It still remains a highly shorted stock, but I contend its quite oversold. Retail is facing serious headwinds, but they are still making (some) money.
The Futures
The futures are looking a bit shaky with US and Euro markets probably opening down slightly, with the local market actually up 10 points back to its Friday closing price. The data tonight is services related – EU Services PMI/Retail Sales, UK Services PMI, with no major US data to report.
Let’s see what happens in Market Morning tomorrow.
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