By Chris Becker
These daily updates need to be placed in context with the longer trends and drivers amidst the overall technical picture, so head to Macro Investor for a free trial. Former “Trading Week” readers will find it reborn as “Technicals“, published 8.30am each Monday morning.
The response to last night’s volatility reverberated around Asia today, although again mainland Chinese markets went against the grain and rose. The ASX200 reacted as expected, losing over 1% falling below its 200 day moving average again. I have a closer look at the bottom of the post for a full roundup including technical analysis of the bourse itself – but the main reason was the BHP downgrade. The Nikkei 225 did the same, while the Hang Seng was down 0.9%, the mainland Chinese markets were all up, the Shanghai Comp up 0.8% to 2128 points, hopefully finding a bottom for the China permabulls.
On currency markets, the Aussie has surged all day, and accelerating into the evening session, now above 1.05 against the USD whilst the Euro/USD has done the same, taking back half the losses of last nights unreal market action.
Funnily enough, gold (USD) is rising too, getting itself off the canvas from $1590 and now heading for $1595USD per ounce level but in AUD terms the weakness continues, as the currency remains strong, currently at $1516AUD per ounce. That’s quite a fall for the AUD/gold cross – the $1500 level is key IMO.
There was a slight return to Aussie bonds today, with yields falling nearly 4 points to 3.1% – Euro bond markets have opened and its very mixed. Bunds are being sold off, Italians bid up and Spanish bonds slightly sold off – its all over the place, but still calmer than last night.
Australian Stocks
Looking to the table showing all the sectors and ASX8 stocks (the top four banks – Megabank – and the top four miners), the best mover was telecom, with the worst moves the materials – mining – sector, due to the rapid falls in both BHP and RIO, down over 2% and 4% respectively. This was on the back of BHP taking impairment charges on its US shale gas assets (and Australian nickel), plus a downgrade in earnings, with the Big “mostly owned by non-Australian”, looking set to print the worst result in four years.
I thought we had a mining boom?
As to the index itself, well, I did suggest this has the hallmarks of a bulltrap:
The index is back below the 200 DMA, and the weekly candlestick chart does not provide an easy techincal pciture to paint going forward. The indicator I developed for FARM (which has been tested on over 40 years of data across the All Ords, Nikkei, S&P500 and DAX) is signalling a “hold” for the index, still in a bear market condition. This ain’t no new bull market – but we wait the non-farm payroll (NFP) print tonight which may or may not get the stimulus buttons moving, and thus, a new bear market rally.
These are not times for the faint of heart or shallow of character to be opining about certainties, that’s for sure. Until Monday, have a good and safe weekend. I’ll be writing up my Technicals piece (formerly Trading Week) with trepidation tomorrow morning – can’t say enough that tonight is crucial to where we are going….
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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