The false dawn is upon us once more. Its either a great time to “back up the truck” or “get the truck out of here”, depending on how you view risk. Apart from subjective valuations (permabulls like to pick and choose the metrics that fit their narrative, as do the bears) there’s not a lot to excite the markets out there, particularly all the holstered central bankers…
The ASX200 dropped on the open absorbing the flat news from Friday, where US Non-farm payrolls disappointed (although the result was spun rather masterfully by Adam Carr, where he also slurs an entire continent – nice one Adam) and closed down 39 points or 1% to 4118 points. Check out my daily technical analysis of the ASX 200 after the wrap at the bottom of the post.
The New Zealand NZ50 finished flat, whilst the Nikkei 225 fell 1.4%, the closely watched 200 day moving average proving very strong resistance indeed. It was the Chinese markets that really “sang” today, with the Hang Seng down 1.8% but the Shanghai Comp off worse – and here I admit fully I got this call wrong – and has now retraced over 2.5% – falling below support I had thought would hold at 2200 points:
On currency markets, the Aussie continues to weaken, still battling with resistance and the 200 day moving average. We are covering currencies more thoroughly in Macro Investor in today’s edition, whilst the Euro/USD cross is stable, 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, the latter flat again throughout the Asian session, now at $1583USD, whilst in AUD terms, it continues to slip, now at $1553AUD per ounce as the sideways weakness continues.
In the debt markets today, Aussie 10 year yields fell as bonds were bid up, now at 3% even, rejecting resistance and with the yield curve remaining sharply inverted.
The big movers in the ASX8 (the big four miners and big four banks, seen in the table to the left) were therefore the materials like BHP, RIO and NCM, all rejected again as they continue to decline. The banks remain resilient – indeed CBA seems to have gotten ahead of itself and remains elevated. More on that later…
On to the index – the ASX200 has now dropped below tentative support and its 50 day moving average at 4140 points, and is likely to stay in the 4040 to 4140 trading range until some sort of risk resolution is, well resolved. Remember, the index is down in the dumps like this because of the poor performance of the mining sector, whilst financials are actually do pretty good (if you’re after little to no capital gain over the medium term that is, and are happy with dividends):
Its fairly quiet tonight, with German merchandise trade the only print of note, but then we have Q2 earnings season in the US kicking off – with a large proportion of companies telling analysts not to expect much in the way of profit growth. Indeed margins look like topping out – it will be an interesting couple of weeks/month – and I thought I’d get a rest after working on the FARM all day…
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.