By Chris Becker
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Well another interesting day on markets, with the labour force figures in the morning (steady as she goes Captain Stevens, navigating between the hot, lava spitting island of inflation and the icey, melting iceberg of deflation) with Chinese industrial production numbers disappointing – but not – in the afternoon.
The ASX200 had a breather, down about 4 points, as bank stocks were sold off on their very good runs and commodity stocks were bid up, so effectgively no change. But this sector rotation is something to be wary off, and I’ve already opened (and closed) a few trades for the MacroTrades portfolio over at MacroInvestor. I’ll take a closer look at the bottom of the post for a full roundup including technical analysis of the bourse itself.
In contrast, the rest of Asia was a-booming today. The Nikkei 225 was up over1% to just below 9000 points – check out the chart below with the AUD/JPY (which I’m long) as a good proxy and leading cross for this sort of bullish action on the Nikkei:
Hang Seng was also up 1%, but the real telling of what’s going on is the mainland Chinese share markets reaction to the industrial production and fixed asset investment prints. Whilst the Shanghai Comp was only up 0.6%, the rest were up more than 1% as it continues to break out from its bottom at 2160 points.
Other peripheral Asian markets, like the KOSPI and Taiwan also had 1-2% days, as traders are probably betting that the slowing Chinese economy will get some yumcha from the central kitchen to keep things ticking.
On currency markets, the Aussie has had a good day, peeking a little over 1.06 after the steady unemployment rate print (remember the real measure is +/- 0.2% outside the actual print – check out the trend as always), and remains slightly under going into the evening session, whilst the Euro/USD has slipped below 1.24 again, continuining to meet heavy resistance overhead:
The US Dollar Index remains the one to watch, having sold off in the last couple of days, it too is meeting heavy support just above 82 points. (remember the DXY is 57% Euro…)
Gold (USD) really wants to have a go at it – but is still dicing with overhead resistance. Oh I wish I was trading this (its actually the most fun security to day trade – i.e the only one I’m good at intraday)…
Anyway, its currently at the $1616USD per ounce level. In AUD terms, it continues to struggle under even more weight of resistance, remaining at $1525AUD per ounce .
Australian Stocks
Earnings season continues today – and we had lots of reversals and profit taking going into reports (Tabcorp comes to mind, as does CBA), with Telstra falling over 2% on a lift in full year profits. The market came back a bit today – notice the strong selling pressure with the tails above the last couple of candles:
A retracement down to support at 4270 points would not be unusual, and actually healthy for this rally to continue. In fact, a fall down to around 4200 on the uptrend line would be good to keep the overall momentum going.
We await tonight’s action, as always our market reacts to the US and Europe.
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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