ASX Shares Daily – 10th July

By Chris Becker

These daily updates need to be placed in context with the longer trends and drivers amidst the overall technical picture, so head to Macro Investor for a free trial. Former “Trading Week” readers will find it reborn asTechnicals“, published 8.30am each Monday morning.

 

Well, for the ASX200 at least, it appears the false dawn is turning into a “roll over and play dead”, as the Chinese trade balance figures sent the local bourse into the red. Or was it the release of the aptly named “BEAR” fund on the ASX today? More on that in the Classroom in next edition of Macro Investor – I reckon its misnamed – should be the “FOX” fund!!

So what happened? Well the ASX200 closed down 20 points or 0.5% to 4098 points for its 4th consecutive loss. Check out my daily technical analysis of the ASX 200 after the wrap at the bottom of the post.

The New Zealand NZ50 finished similarly, off 0.4%, whilst the Nikkei 225 fell the same, also staying below the closely watched 200 day moving average. The Hang Seng finished in the black – just – but the  Shanghai Comp was down 0.3% and almost down to its January close just above 2145 points:

 

If it breaks this level, there is daylight below to the early 2009 GFC low to 1700 points – not a pretty fall, which is why the Trade we have on has a risk of only 0.5% with a stop below the January low. Remember, risk management trumps entry decisions – ALWAYS!

On currency markets, the Aussie continues to stay weak on the daily charts, still battling with resistance and the 200 day moving average overhead at 1.025, whilst the Euro/USD cross is stable for now, it remains in the doldrums.

Meanwhile the battle between the world’s currency and anti-currency continues, with the US Dollar Index (DXY) and gold (USD)  trading places again –  the latter flat again throughout the Asian session, now at $1585USD, whilst in AUD terms, it remains steady at $1556AUD per ounce as the sideways weakness continues.

In the debt markets today,  Aussie 10 year yields fell further and cracked 3%, rejecting resistance once more as the yield curve remaining sharply inverted.

 

Australian Stocks

The small selloff today (and the Small Ords falling further) was again because of the materials sector which was down 1.1%, whilst the Telecomm sector – i.e Telstra – was one of the best performers. Telstra is actually now at a 3.5 year high – and guess what…KC Signal! Remember, this has a poor reliability rating, but the stock is definitely overbought – even my very short term trading system (which is reluctantly in hiatus until they perfect cloning technology) is overbought.

Interestingly, FARM , our proprietary database/investing system has recently “upgraded” Telstra (TLS)- which it considers “Investment Grade” – to a “HOLD”, because it is now just below FY13 estimate of value and above FY12 estimate. Remember, TLS is fundamentally like a bond, but speculatively treated by the market because of the NBN payout. Caution prevails.

The big mover in the ASX8 (the big four miners and big four banks, seen in the table to the left) was Newcrest Mining (NCM) but continues to be rejected by the market even as the gold price remains steady, if weakly sideways.  The banks are a bit shaky at the moment, and as I said yesterday, CBA seems to have gotten ahead of itself and could reverse from this elevated levels.

On to the index – the ASX200 continues to stay below the 4140 level – formely support but now resistance, along with its 50 day moving average, and is likely to stay in the 4040 to 4140 trading range until some sort of risk resolution.

 

Tonight

An onslaught of industrial production figures from Euroland tonight, along with secondary US retail sales data as the Q2 earnings season in the US accelerates. We’ve already had the Italians report – and finally its a positive print for the worlds 7th largest economy – up 0.8% month on month! Still down 6.9% y-o-y, but at least this decline seems to be decelerating, although last month’s print was revised down.

Don’t miss the overnight market updates on Monday by my colleague Greg McKenna, in MacroBusiness Morning.  You can also find me rambling on Twitter here.

As I said at the top, I do a full technical analysis of all major macro markets each week called “Technicals” at Macro Investor, which used to be called “Trading Week”. Even if you’re not a trader, this can give you an insight into how world markets are travelling, since our stock, debt and housing markets (still mainly financed by European banks and Chinese resource demand) follow the rest of the world.

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.

Comments

  1. more seriously … the picture of the Chinese stockmarket on the edge of a 400pt fall … yeah maybe but the authorities do have a lot of levers to pull and they have just started to ease monetary policy if I recall correctly.
    Is it more likely that we are approaching a short term low in that market?
    ASX 200 … completely agree range-bound. Time for a snooze and holiday if you only play in ASX-space. Only significant US action or a complete ECB brain fade can disrupt the ASX200’s masterful inactivity it seems.
    Might as well watch Le Tour and then the Olympics.

    • V good point Curious – just like the Federal Reserve, I’m sure the CCB is aware of the sentiment around price levels in stock markets. Our macro thesis rests on this and other assumptions, whilst the technical picture is in contrast, but the probability of a short term low is rising, particularly at this level. But risk management remains key.

      It may well be a good time to have the northern hemisphere summer off – I’d love to be in Italy/France right now, QLD winter is dreadful this year, very cold and wet.

  2. I am quite new to investing in shares.

    It will of great help if you can answer a few questions.

    1) I am interested in buying 100 of XYZ as I dont have any shares of XYZ, the advice is ‘hold’, what would ‘hold’ mean me to in this context?

    2) I am interested in 100 of ABC and I dont have any shares of ABC, the advice is ‘accumulate’ or ‘buy’. I am under the impression that i can buy the shares. am i right?

    • Good question Virus – the standard industry ratings are:

      Sell – if you have any of this sell it ASAP
      Hold – if you have this stock, dont buy anymore, or sell any portion for now, as the opportunity to buy/accumulate anymore has passed
      Accumulate/Buy – build a “position” in your portfolio

      FARM uses Sell and Hold in the similar way, but:
      Avoid – do not touch this for now (even if it looks undervalued or price is going up)
      Take profit – sell 20-30% of your current holding
      Buy half/full – FARM gives actual % allocation recommendations, not just “this looks good, buy some/back up the truck” and determines if the share is speculative or an investment

      The last recommendation determines your risk and capital management within the portfolio, another area not covered well by stock-only newsletters. All of the recommendations are done based on a 5 factor valuation, risk assessment, macro analysis and market condition, not just a simple “this is undervalued” so buy it process (which has its place, in bull markets only usually).

      We’ll expand on this more in future Classroom articles and in forums with our subscribers. Thanks again for question