By Chris Becker
On reaction to overnight markets, the ASX200 slumped again on the open almost falling below 4000 points by 2pm before the guys who manage your super funds, high on some expensive beers and cocktails came back to work and bid the market up for the rest of the afternoon. It still closed down 0.3% today to 4013 points, well below support in recent weeks, as seen in the chart below (also marked are my medium term system short/tight signals, plus the KC Signal from 1st May that signalled a possible top):
Looks like yesterday’s tail was indeed just noise, not a sign of a one day reversal (as a trend trader, I don’t trust one day reversal signs – prefer breakout or trends, the latter which implies several days movement. Hence why even though the KC Signal worked, I’m skeptical of its standalone use)
In other Asian markets, the Nikkei 225 was down 0.8%, but the Hang Seng and mainland Chinese markets are coming back after lunch (maybe their cocktails had bigger measures?) with the former currently up 0.3% and the Shanghai Comp only down 0.09% – so flat – at 2222 points.
On currency markets, the Aussie is holding onto gains of nearly half a cent against the USD from last night’s slump, still above parity at 1.0029 whilst the Euro/USD cross has come up only slighlty, at 1.25 flat. The US Dollar Index (DXY) is also coming back a bit, having reached 82.6 last night, its hovering around 82.4 points. Here’s the weekly chart for some context:
Gold is proving very resilient, up at $1583USD an ounce after bouncing last night, but remains in a tight trading range as I’ve been explaining in recent weeks. In AUD terms, gold is rising slightly, now at $1579AUD per ounce up almost $25 an ounce in the last 3 days.
Finally, in the debt markets today, Aussie 10 year yields fell again, losing 7 basis points to finally crack 3% – again! They closed at 2.92% – how long can this divergence with the All Ords dividend yield, as mentioned by Sell on News today last?
Here’s the last 10 years with the spread calculated – the current spread only occurred at the GFC – does this mean value in the ASX200, or bonds overpriced? Or previous dividends too high? Could be all three…but not the way you think.
European bonds have all sold off at the open, with Spanish and Italian bonds again the most, yields up 7 and 5 basis points respectively, with Italy above 6% – again. German bunds are seeing selloffs too, the real reason is because there’s a small bounce in Euro bourses (around 0.2% across the board)
Tonight
Dataflow tonight is US centric, although we will have the very interesting April retail sales in Italy first. The usual secondary weekly retail data from the US is next up, then the Case Shiller house price indexes, consumer confidence, Richmond Fed Mfg Index thereafter.
Don’t miss the updates when my colleague Greg McKenna, who has taken over MacroBusiness Morning, will report overnight market moves and data analysis.
Til then, you can find me on Twitter here and I’ll catch you tomorrow afternoon.
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