By Chris Becker
Green green green. This QE3 rally has more dips and bumps then a dippy bumpy thing. Asian markets were up today, with the ASX200 closing above 4400 points, up 0.25% to 4408 points – I’ll take a closer look at the bottom of the post including technical analysis of the bourse.
The Nikkei 225 was up exactly the same, the Hang Seng doing even better – up 0.77% currently, as Chinese markets are wavering between scratch and slightly up days across the mainland. The Shanghai Composite is up 1 points – yes, just 1 – and is at 2026 points after falling 2% yesterday.
Euro markets have tentatively opened – actually better than that, the Euro Stoxx 50 is up nearly 0.5%, with the FTSE MIB and IBEX 35 the big movers up 0.7% or so each. What will tonight bring across the Atlantic to close out the week?
The currency we love to hate, the Aussie battler (AUD/USD) has come back after “bottoming” at 1.039 this time yesterday, but yet to clear its recent high just below 1.05 cents. I think everyone is watching that technical level…
The Euro/USD was having a so-so Asian session, but has been sold off into the London open, now just below 1.30 again and looking weaker in the short term. The US Dollar (DXY Index) is flittering with its 4 day uptrend, and is currently at 79.31 points – there’s a lot weighing against the USD, that’s for sure.
Meanwhile, spot gold (USD) is being bullish by not being bearish. Cute I know, but true – it is holding up under some very strong support at $1755-1760 and needs to head past $1780 before the next upleg in this gold/anti-dollar rally.
Australian Stocks
As you can see in the table above, it was utility stocks that took the crown as best sector today, followed by IT stocks. It seems the possible rotation out of defensives (utilities, staples etc) into more riskier sectors (materials, industrials etc) is not happening as I thought – both Wesfarmers (WES) and Woolworths (WOW) are holding up for now as this rally looks to be broader than first glimpsed.
In the ASX8 (the top four miners and banks), the biggest mover was the Westpac (WBC) Division of Megabank, up 1.3% – and looking on its way to retest the $25 target level again. Good place to put some shorts IMO, but not directional – shorting banks when EVERYONE loves them (yes, you all do, admit it) and on the cusp of more interest rates cuts is pretty risky. Again, no risk, no reward.
As for the broader index, here’s the daily chart – where the “jaws of doom” between 4400 and 4440 are closing in. The nexus is for the index to maintain above its trendline, with a possible retracement down to 4250 or so very possible, but also healthy for a more sustained rally. The weekly chart looks even more interesting, but you’ll have to wait until Monday’s edition of The Technicals – and of course, as you all should – for what happens on Wall Street tonight. To look at a chart of the ASX200 or All Ordinaries – or any top 50 stock – and not look at the S&P500 is like driving with one eye closed. Doable, but no depth perception.
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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