By Chris Becker
Trying to figure out why Australian stocks are up amid this volatility? Thank Mr Mainly Owned by Foreigners BHP and RIO, which pushed the bourse up 0.3% to 4474 points just above support, as the US markets in future trade look shaky. Its also the top tier Chinese stocks that are pushing this action, even though the Hang Seng and Shanghai Composite are off some, with the Nikkei 225 also down about half a percent to start the week.
The Aussie (AUD/USD) as the risk proxy rose in the morning on the trade figures but has steadied this afternoon back to its support line at 1.036 on the hourly charts, waiting for direction on US/Euro markets tonight and the inevitable decision on Melbourne Cup day tomorrow. With the other major currencies, the Euro continues to weaken as the US Dollar Index (DXY) gains more strength on what looks like a new breakout above the 200 day moving average, but not yet confirmed by the MACD (a trend strength indicator – if the histogram is positive, its bullish, negative bearish):
This is reflected in undollar – gold (USD) which after getting hammered on Friday is bouncing just off its 200 day moving average, but only just – its below support, so it could head back to $1630 quick smart from here:
Australian Stocks
It appears that there’s some sector rotation going on with materials getting bid up by a selloff in industrials and other sectors – Rio Tinto (RIO) was the winner out of the ASX8 (the top four banks and miners) today, up 2.5% to its overhead resistance level showing some spark:
BHP-Billiton (BHP) looks even better, having closed above the 200 day moving average last week and resistance above $34 per share – this could really get the bourse moving if funds rotate out of financials as the other 3 divisions of Megabank go ex-dividend soon:
As for the index itself, while we had a trendline break last week following the US markets, prices have not fallen below the April 2011 high at 4450 points, or the orange horizontal line on the chart below. If it does break, the downside target is the 200 day moving average at 4300 points. I have warned the Macro Investor subscribers about this potential action, and gave them some options on how to protect their portfolios from a fall of this magnitude. Read the article here for more information.
We await the US Presidential elections, the RBA meeting, the vibe etc etc…
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.
You can follow Chris on Twitter.
Disclaimer: The content on this blog should not be taken as investment advice. All site content, including advertisements, shall not be construed as a recommendation, no matter how much it seems to make sense, to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The authors have no position in any company or advertiser reference unless explicitly specified. Any action that you take as a result of information, analysis, or advertisement on this site is ultimately your responsibility. Consult someone who claims to have a qualification before making any investment decisions.