By Chris Becker
In case you’re wondering what that chart is above, its the intraday correlation between the Dow Jones futures (orange), the ASX200 (red) and the Shanghai Composite (black). Think you can get away with only looking at Aussie stocks only? The chart btw came from David Scutt, the Treasury Dealer at Arab Bank whom I follow on Twitter. Following today’s slump in industrial profit figures in China, there secular bear market continued, which dragged the local bourse down with it. The ASX200 fell 0.1% today or 5 points to 4343 even though it started the day with as much hope as a first year uni student beginning his political science degree. And then reality set in and the drinking began. 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 slightly, but all the action was in China, with the Hang Seng currently off by 0.5% and the Shanghai Composite down nearly 2% to 2055 points. As I said on Friday, are we going down to 1700? Avid historical chartists will note the striking similarity of this bourse to the Nikkei 225…
Aussie 10 year bond yields dropped again today, losing 4 more points to 3.19% after capturing the big bad bond bears.
Again, moves are afoot in currenciese big moves are in currency markets, where it looks like a top in the Aussie is in, at least in the short term, as it slips below 1.04 against the USD, as does the Euro/USD cross, as King Dollar asserts himself. The Euro is currently trading just above 1.25 but the US Dollar Index is slowing coming back after breaking its daily flag pattern recently, now at 81.6 points:
Gold (USD) is still strong after its big breakout recently, now at $1672USD – and in AUD terms though, the breakout is building momentum, now over $1609AUD per ounce – got GOLD ETF? The chart below tracks the GOLD ETF vs the All Ordinaries:
Australian Stocks
Earnings season is slowing down, thank Dog, as I covered almost 100 last week where you’ll find the full list, including updated valuations, Risk Scores, macro evaluations, suggested portfolio allocations, position signals and the lot in today’s edition of Macro Investor But today at least, we saw some good results – particularly for MI favourite M2 Telecommunications (MTU) although it was ugly for Atlas Iron (AGO).
In the ASX8, its almost as if someone has hit the pause button across the whole field (interspersed with some “sell” buttons) but the biggest winner was Rio Tinto (RIO) up slightly, but nowhere near taking back the near 5% loss on Friday.
On to the index – well I did say the 4400 point level was the target in this rally, and that a dip was inevitable, probably down to 4220 – but this is looking more like consolidation then dip – too many people are hoping for another shot of the juice:
The daily chart above shows we almost have another “dead cross” of the 50 and 200 day moving averages, similar to the KC Signal top in April, and the long upper tails on recent daily candles points to (just like the first chart at the top of the post), lots of selling pressure as runs are taken off the board:
This weekly chart was in The Technicals edition this morning and shows where we are from a longer term standpoint. I still think we need a retracement to just over 4200 points to make this rally work. A sustained break of the 4400 point level is possible (anything is in markets) but we are already way overvalued here fundamentally, in the wrong space macro wise as well (there is still a business cycle people!). High risk abounds going into September – always.
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.
You can follow Chris on Twitter.
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