By Chris Becker
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This gets more and more interesting – for those of you who didn’t get the reference from the picture above, maybe after today’s trade data from China you don’t need to have this growing probability spelled out?
Domestic earnings have been disappointing so far (check out the price falls in Telstra, Tabcorp) and financials are being sold off after their merry wins of late.
The ASX200 had another breather, down nearly 31 points, instantly reacting to the bad export numbers from China as bank stocks were sold off again. I’ll take a closer look at the bottom of the post for a full roundup including technical analysis of the bourse itself.
The rest of Asia followed the falls, withe the Nikkei 225 taking back yesterday gains as did the Hang Seng while the Shanghai Comp was again disappointing, as this tentative break of the trendline and above the previous lows has got the permabulls so excited:
On currency markets, the Aussie was sold off immediately on the China trade figures, for good reason, losing half a cent and almost falling below 1.05 against the USD. The Euro/USD has slipped below 1.23 now, continuining to meet heavy resistance overhead:
The US Dollar Index remains the one to watch, having steadied in the last couple of days, it has shot ahead bouncing off 8.23 points almost up to 83 points as it appears risk maybe taking a backseat..)
Gold (USD) is remaining resilient, only losing about $7USD per ounce today, yet still dicing with overhead resistance, its currently at the $1611USD per ounce level. In AUD terms, it’s boucing back as the AUD gets sold off, now up to $1531AUD per ounce:
Australian Stocks
Earnings season continued today – and we had lots of reversals and profit taking going into reports, but the main news was selloffs in financial stocks, which were all looking overbought. I said yesterday to “notice the strong selling pressure with the tails above the last couple of candles” on the daily chart with “a retracement down to support at 4270 points would not be unusual”: and that’s what happened:
I’ve marked on that chart my expected trajectory if we sell further falls coming out of the US and Europe in the dip that is now likely firming. Retracement to 4200 and then a bounce around there is a good health sign for the rally to continue. But I continue to have my doubts – the macro picture is not looking good and equity markets have to jumped a pretty big valley to get to the over side. I think we may just be jumping up into the air, not soaring over….
Chris Becker is an investment strategist at Macro Investor, Australia’s leading independent investment newsletter covering stocks, trades, property and fixed interest. Each week Macro Investor publishes tables on the top ten most undervalued and overvalued stocks on the ASX. A free 21-day trial is available at the site.
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