By Chris Becker
Remember to read “Trading Week“, published Saturday morning, to put these events and ideas in context.
Well that was an interesting day! The risk-off mood of Friday has translated to a sell-off on the local bourse, the ASX200 eventually fell nearly 2%, or 78 points to crack the 4000 barrier for the first time since late November last year:
The market is now down 1.76% for the calendar year to date – throw in some dividends, and its gone nowhere in six months.
Haven’t looked at your super fund lately? Best to leave that envelope on the counter…
In the short term, the technical picture remains on a knife edge, hitting support at the lows (apart from the false break/double bottom/rabbit ears in October) of the last correction. The market really has the weight of fear and stress against it, and will take an almighty catalyst (with the letter Q and a number thereafter, or a new fiscal union emanating from Euro-land) to move it up.
So we await June 17-20 for the Greek elections and the FOMC meeting with The Bernank with baited breath, and European shenanigans (love that word) in between.
Here’s the bigger picture, an updated chart from my Trading Week analysis,
Note that this month’s candle is now below the low and open months of the start of the rally at the 4000 point mark. I contend if we continue below 4000 points, the next move down will be towards that red downtrend, at 3700-3800 points with a pause at around 3870 points, the extreme lows of last year’s correction. In other Asian markets, the damage was more severe – so put the MSM “hysterical” headlines aside and feel sorry for our Asian brothers and sisters. The Nikkei 225 was down 1.7%, the best of them, with Chinese markets copping most of the heat. The Hang Seng is currently down 2.4%, whilst the Shanghai Comp is currently down nearly 3%.
European markets have opened down across the board – the German DAX down another 1.5%, Italian and Swiss markets off by a percent or so. The DAX is barrelling down to a scratch year too, up only 2.4% year to date, having lost over 16% since the start of this correction:
To put that into perspective, the Spanish market is down 28% and Italian down 14% year to date.
On to the currency markets, the USD is flat, just below 83 points on the DXY Index, mainly due to Euro weakness as it wrestles with the 1.24 level whilst the Aussie was hit again by local data releases, down a third of a cent to 96.63 cents. So much for a small bounce.
Again, the real move was in Aussie 10 year bond yields hitting another record low – this time at 2.76%, losing 7 points.
Gold is loking weak in the Asian session and is currently at $1616USD per ounce, down around $7 on its epic spike on Friday night, whilst in AUD terms the shiny “currency” remains strong, still at $1671AUD per ounce.
Tonight
The data flow tonight is a bit lighter thank Dog, with Eurozone Producer Price Index (PPI) for April out soon alongside a private measure of investor confidence. Then we get the New York ISM print. For the full week ahead of data – hugely important locally – check out our Economic Calendar here.
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