By Chris Becker
A very bullish day in Asia as the GDP, industrial production and fixed asset investment prints for China came in as expected. All equity indices were bid up although interestingly the commodities complex did a great big yawn – no moved in energies or precious metals at all.
Hmm.
As for the local markets – well apart from some very strange trading in ANZ, CBA and ALL – and the index itself – probably on option expiry – the ASX200 jumped at the open gaining over 1% by lunch but tapered off in the arvo, gaining 31 points or 0.7% to 4559. I’ll take a closer look at the bottom of the post including technical analysis of the bourse.
The Nikkei 225 also jumped again, up 2% continuing a really big bounce off support and its rising trendline that is making the range traders very happy. The Hang Seng followed the Shanghai Composite after the print, although it was only up 0.7%, the latter up well over 1% currently.
Aussie bond yields were assaulted again – gaining another 10 points for the 10 year up to 3.22% – for mind yields are going back to 3.4% before the RBA cuts again, so bide time to load up on Aussie bonds:
There was some talk today by those who should know better (and just stick to forecasting wars??) that the recent rise in the Aussie (AUD/USD) was because no one believes the “China is weaker/Australian economy is rooned” story. Err no – its because of USD weakness – remember on every side of FX is another currency, and with the AUDUSD, its the USD.
Against other currencies, like the Euro, Pound Sterling and the Swiss Franc it continues to be weak. Anyway, as I’ve been explaining in my weekly Technicals piece at Macro Investor, the battler remains in a trading range, economists jabbering aside, but it is now above its 200 day moving average and is on its way to 1.06 if USD weakness continues or until the RBA cuts again. There is a great big foot hanging over the AUDUSD – and probably in 2013, it will kick it in the guts, who knows? Here’s my basic study on the weekly chart to put things into perspective:
The USD weakness isn’t directly translating into Euro strength with resistance overhead still a concern:
The US Dollar (DXY Index) itself looks weak, hovering just above 79 points – the key level on the weekly chart remains 78 points to complete this capitulation, and we are off to the races:
Gold (USD) is very slowly coming back but hitting short term resistance overhead at $1753USD per ounce. For now this retracement has not yet become a full on pullback – as I said I’m short using my short term system (which is not the medium term system I use at Macro Investor -its for cross hedging my trades) on a possible drop down to $1730USD. If you still believe the Fed and others will continue this currency war, then gold will continue to rise…
Australian Stocks
Its time for materials to shine! Look at those daily numbers above – Rio Tinto (RIO) leading the pack up nearly 5% in a day. I said yesterday that its latest moves were just noise – I was wrong:
We’ve now had a clear break on the weekly chart too – one day does not make a new trend, but its hard to resist this move when others like BHP, WPL (which rose on an increase in its production forecast) are moving up. Here’s the materials sector weekly chart – pretty obvious setup here, and I’d rather this than financials which are WAY overbought:
Heres the weekly chart of the ASX200 with support and resistance lines drawn everywhere. The trend since June is pretty obvious – and very fast – maybe a little too fast? A lot of overbought indicators are ringing at the moment, but as I discuessed with some other traders on Twitter today, trends can remain overbought for a long time.
Nonetheless, I have had a KC Signal clang here on the dailies (this is a technical signal of my own design that caught the top of the last big move back in April):
If we get a correction in financials whilst materials pick up the pace, the bourse can keep on climbing to 4900 points. But again, this is all dependent on EXTERNAL markets, so keep watching the S&P500 and the USD and US T-Notes. You’re flying blind if you don’t watch the real market movers.
This free daily update should be read alongside Live Trades articles, published every morning at Macro Investor, and placed in context with the longer trends and macro drivers within the overall technical picture, where Former “Trading Week” readers will find it reborn as “Technicals“, published 8.30am each Monday morning at Macro Investor.
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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