By Chris Becker
An epic day of earnings releases on the local market – almost 60 companies, large and small reporting either before, during or aftermarket. There were some standouts and surprises, and with Fairfax reporting a massive loss today, there’s rumors twirling that Gina Rinehart is preparing to sell some or all of her stake in the embattled media company. Not the best timing in the world, but she’s doing well on iron ore. For now. Timing, not time in the market, matters, for all investors – big and small.
The ASX200 still doesn’t want to close above 4400 points, although it almost did before the HSBC Flash PMI gave truth to the global economic slowdown – although all Asian shares are up! And European shares! Up! Up! Mmm. The bourse closed up 7 points, gaining back what it lost yesterday to finish at 4383. I’ll take a closer look at the bottom of the post for a full roundup including technical analysis of the bourse itself.
The Nikkei 225 was up 0.5% with the Hang Seng flying ahead by 1.1% although this bullishness wasnt as reflected in the mainland Chinese markets, with the representative Shanghai Composite only up 0.3%, and still almost at March 2009 levels. The rest of the board in Asia is Green, with the peripheral markets and even Indian markets all registering gains going into the Euro session, where the Eurostoxx 50 is up nearly 0.8%, mainly because of the German DAX, up 0.6% – even as poor PMI figures roll in. Reality? Pssh. This is the stock market! We don’t need your stinking economic reality!
Aussie 10 year bond yields dropped sharply today, losing 9 points to 3.28% whilst Euro markets have opened and its mainly green and calm across the board.
On currency markets, the Aussie has reversed its slippiness and soared above resistance at 1.05, or nearly 60 pips in the last 24 hours, all on the dovish Fed minutes. This has been replicated in the Euro/USD which has put more runs on the board at 1.256 as the US Dollar Index weakens, now heading for the all important 81 point barrier:
Gold (USD) keeps on moving up, breaking out of its sideways funk, now at $1665USD per ounce, moving up in AUD terms too, but slower at $1583AUD per ounce. All the precious metals are on the move, and most traders would have long positions by now, at least on a daily basis (as we do at Macro Investor, hedged via silver) – but here’s the weekly chart of gold for some perspective:
Australian Stocks
I am getting sick of earnings season – this is the biggest week, it cools down thereafter, thank Dog. As I said at the top of the post, we had some big hitters reporting today, including Fortescue (FMG) – surprisingly upbeat (it needs to be to pay back all that debt), QR National (QRN) which has defied the sceptics with a big profit boost, and Iluka and Cabcharge, and Cash Converters……you’ll find the full list, including updated valuations, Risk Scores, macro evaluations, suggested portfolio allocations, position signals and the lot in the next edition of Macro Investor on Monday morning. It’ll be a big list, trust me! Anyway, the market preferred gold miner Newcrest (NCM) again, as the best mover in the ASX8 (top four banks and top four miners) as gold prices continue to lift, it was up more than 4%, whilst the banks cooled.
I’m still pointing to a probable 4400 point target, with resistance at the former high at 4440 (which was also the support level before the 2011 correction) – because I consider any level above that to be grossly overvalued for the market as a whole (current estimate is circa 4100 points), but the markets can be irrational longer than you can listen to your broker…
As I keep saying, this market moves because of the US market – so as long as European and US stocks are bid on hopes, desires, wishes and dreams about stimulus – your portfolio (if long) will continue to go up. Probably.
For this to be a more sustainable rally, I still want to see a retracement back to support of that upward trendline, which gives a better risk/reward entry if you want to be long this volatility. Until then, this is a pick ’em and stack ’em type of market to be in.
These daily updates need to be placed in context with the longer trends and drivers amidst the overall technical picture, where Former “Trading Week” readers will find it reborn as “Technicals“, published 8.30am each Monday morning.
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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