By Chris Becker
Well this is turning into a fizzer isn’t it? Or just a simple retracement? We’ll only know after the fact, but Asian markets fell across the board today, although our local bourse was one of the better ones, the ASX200 only down 0.26% or 11 points to 4361 points – I’ll take a closer look at the bottom of the post including technical analysis of the bourse.
The Nikkei 225 was hammered, losing 2% or nearly 200 points, with the Hang Seng close behind losing nearly 1%, but again the action was in mainland China. The Shanghai Composite lost 1.2% and is just barely above 2000 points – the bear market continues…..
In Europe, markets have all opened down, the EuroStoxx index down 1.4% as both the majors and peripheral bourses all drop (only the FTSE is down less than 1%) On the daily charts, this move doesn’t look too ominous, and as our Macro Investor readers would know, there are certain key levels to watch that would turn this “Tom Jones” retracement into a bull trap.
The Aussie battler (AUD/USD) as the risk proxy de jeur is spelling out something though – having fallen from just over 1.06 to now just at 1.034 against King Dollar. The Euro/USD is doing the same, falling from nearly 1.32 to just below 1.29 where it sits at the start of the European session. The bounce I expected in the US Dollar (DXY Index) continues, but there is signfiicant resistance at the 80 point key level:
Meanwhile, spot gold (USD) continues to hang on tight with another “cross” candlestick day moving nowhere – below heavy resistance at $1780 and just above support at $1760USD per ounce. Hold on tight!
Australian Stocks
As you can see in the table above, materials stocks continue to decline, alongside energies, both off by more than 1%, with health and staples – the classic defensives coming to play today. Amongst the ASX8 (the top four miners and bankers), Rio Tinto (RIO) lost 2% seemingly on its way back down to $50 per share again after a false break recently (which shows the value of position sizing importance vs. picking the entry):
Here’s the daily chart of the ASX200 where the retracement I expected to the uptrend or 50 day moving average (the grey line above the red line, which is the 200 day moving average) looks almost complete although we could have a false break below. The bulls hope this is just a glitch in the QE matrix, the bears are rallying, hoping the market continues to deflate, while the foxes don’t care and make money each way…..
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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