By Chris Becker
Remember to read “Trading Week“, published Saturday morning, to put these events and ideas in context.
The ASX200 continued its two day snapback from the awesome falls of the previous two weeks, where the market plunged just over 9%, nearly wiping out all the gains for the calendar year. Indeed, the index is still only just above the 2004 year end close, if you needed more evidence that we remain in a secular bear market.
Anyway, today was a good day, the bourse up 1.1% or 47 points to 4121, remaining well above short term support above 4050 points on the daily chart and still on trajectory for the DCB or is it the DMZ?
DCB: Dead cat bounce up to resistance at 4150 OR the DMZ: real resistance at 4300 points, the 200 DMA
This market, in the medium to long term at least, is not as oversold as some would say and is still ripe for a completion of a dead cat bounce to around 4150 points or so before resuming. The key support level to watch will be 3900-4000 points, particularly on a weekly close, with overhead resistance at 4300 points to clear.
Again, individual investments count here more than following the ASX8, which is the ASX50, which is the ASX200, which is your super fund, usually.
Onto other Asian markets, where its green all across the board, from Japan to the Philliphines, most with a 1% or so gain. The Nikkei 225 finished up 1.1%, but still in the doldrums, whilst the Hang Seng put on the same, the Shanghai Composite currently up 0.8% – with other Chinese bourses much happier, all up on speculation more misguided infrastructure spending/printing will be brought forward again.
I cannot help but think of this song. Again.
Onto bonds and there was a broad sell off of Aussie’s, losing 6 points to 3.2% yield, with even Japanese 10 years sold off, but only slightly. In early European trade, peripheral bond markets are being bid up slightly, gaining 4-6 points or so.
Onto currencies – where the Aussie continues its move as the risk-on currency proxy, remaining above 99 cents against the USD, but the Dollar Index still above 81 points going into the European open.
As this long term weekly chart shows, King Dollar is reaching resistance at 81 points, seemingly on its way to repeat QE3 (which both required the USD hitting 88 points), with major support since the August 2011 lows:
pink line is 200 day moving average
Gold is having a weak Asian session and is falling going into the London market open, now below $1588USD per ounce. The bugs need some strong bids in the next few weeks to stop this turning into a rout for the shiny metal. Crude oil is strengthening after last nights handsome gains, with both markers (ICE and WTI) up nearly 0.5% already.
Tonight
The data flow tonight is mainly secondary, with UK CPI before the usual weekly US retail sales (Redbook and Goldman stores – only about 15% of the market) printing. We will then see US existing home sales (consensus is looking for 4.66 million, up substantially on prior 4.48 million, which has been building since June 2010) and the Richmond Fed manufacturing index.
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