By Chris Becker
Asia attempted to react to the positive moves on Wall Street last night and did pretty well . The ASX200 just closed in the green after surging in the morning – up 8 points to 4491. I’ll take a closer look at the bottom of the post including technical analysis of the bourse.
The Nikkei 225 jumped up 1.4%, bouncing off support and its rising trendline whereas the Hang Seng had another scratch day, the Shanghai Composite also putting in a paltry day’s work, and going nowhere:
Aussie bond yields remained steady again with the Aussie battler (AUD/USD) getting further above support at 1.015 but still below its 200 day moving average – but this does look bullish in the short term (I’m not yet long on my short term system)
The Euro/USD is starting to get some traction, building off its support level at 1.28, but the US Dollar (DXY Index) remains steady. This is frustrating!
Gold (USD) is finally doing something – I’ve gone short here, but only on my short term system (no scaling, average 5-10 days), not the medium term system we use at MacroInvestor where we have two scaled long positions and wide stops. You can see from the 13 day ADX the shiny metal was well overbought at the end of its nice uptrend recently and has just fallen below tentative support at $1750USD per ounce – its daylight below to $1630, but I still contend this is pullback, not a new trend:
Australian Stocks
One big winner in the sectors today with IT stocks surging over 1% – nice for our IT/Telecom heavy MacroInvestor “Growth” portfolio, but it was the financials that moved on the back of National Australia Bank (NAB) which has shot ahead over 1%, looking terribly overbought on the daily chart. I like the 13 or 14 day ADX indicator – when it hits 40 or so, its usually a sign to take profits – but trends can continue for a long time without reason. Look at the Australian economy for example:
The other ASX8 mover (the top four banks and miners) was Rio Tinto (RIO), sold off as it reported a 5% rise in its iron ore output – some 63 million tonnes from the Pilbara. Thermal coal production – which has been in a nosedive as reported here at MacroBusiness – was also up 21% in the quarter. The market still don’t like it – a quick glance at the weekly chart shows this to be true with heavy resistance overhead:
Weekly charts are fun – in fact I do most of my positioning on Australian stocks for my superannuation fund now on the weeklies, just using the dailies to help with the entry. You can see we’ve had a clear break of the “bull trap” zone between 4400 and 4450, but we’ve stalled. Its amazing how a market “remembers” price – notice that the current support level was also the support – and then resistance – level before the big correction mid last year.
I’ll say it again, but we need a healthy retracement back to 4400 points to prove that support is strong, and thus to re-enter the market for another upleg into Christmas and the first quarter next year. There has been some divergence of late with equity markets – witness Japan, China vs the US markets – so there is the possibility, particularly with a lower AUD, that our market could chug along higher – back to 4950 points even. But all eyes remain on the S&P500 which has been directionless for several weeks now:
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Chris Becker is an investment strategist at Macro Investor, Australia’s leading independent investment newsletter covering stocks, trades, property and fixed interest. A free 21-day trial is available at the site.
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