XMJ Bullish Follow Through?

My observations below should be viewed as general advice and may not be right for you.

Overnight Market Snaphot

 

US Equities got off to a strong start, buoyed by a strong rally in Asian markets on news that the People Bank of China has injected a record amount of liquidity into the banking system. Stocks brushed off a string of negative economic data to rally through the day with indices closing on their highs. This is strong underlying price action. Indeed, the estimate of second quarter GDP indicated growth of 1.3% which was well below the prior reading of 1.7%. Elsewhere, durable goods orders also showed notable weakness as new orders declined by 13.2% during August.  The S&P 500 settled higher by 1.0% whilst the Nasdaq 100 outperformed closing +1.44%.

Yesterday I talked about the strong bullish reversal in commodities such as Gold and Copper, and this proved to be a lead indicator for our equity market bounce yesterday. Overnight, Gold went from strength to strength with the December futures surging to make a high of 1782. Traders in Australia should note that Iron Ore was unchanged overnight and closed at $104.20.

Yesterday I wrote,

“US indices remain the strongest globally and as I have continued to stress, only a break back below 1420 would indicate that this uptrend is over. Thus, this 1425 to 1430 zone could provide a great low risk buying opportunity for traders coming into tonight”

There was a bullish reversal candle right out of the support zone and I believe this is now confirmation of a continued move higher with risk on a break below last night’s lows. The targets are up to the previous highs at 1475 and beyond to 1515.

S&P500 Daily:

Emini S&P500 December Key Levels:

Support Levels: 1435/1430

Resistance Levels: 1445/1450, 1475

ASX200 and SPI Analysis

My observations below should be viewed as general advice and may not be right for you.

My SPI Range today: 

4375 to 4420. Outlier level 4365/70 support and 4430 resistance.

My SPI plan today:

SPI futures closed at 4388 overnight after hitting a high of 4396. Fair Value is currently 4points and thus the XJO is indicated around 4392.

Well yesterday we finally got the strong bounce out of the 4340/50 support zone which was led by the resources. I had been anticipating this setup based on the XMJ chart as well as the strong support zones in BHP and RIO. As a trader you have to be prepared and wait for the price action to confirm the setup. I believe the bullish turnaround in the resource sector has some way to run still and yesterdays lows could be used as interesting stops points for long trades. I continue to focus on “quality” stocks that have formed strong base patterns that offer good low risk/high reward entries into the uptrend. These include AZH, AMX, BHP, MML, NHC, NCM, SFR, and STO amongst others.

Yesterday I said, “If this materials sector is going to hold in and bounce, this is the day and zone that it should do it.” I believe we saw this yesterday: http://fpmarkets.blogspot.com.au/2012/09/time-to-look-at-resources.html

Today there will be strong early resistance at 4395 to 4405 as per the SPI 15min chart below. This may provide some initial resistance. Traders who think this is a “dead cat bounce” should use this zone for potential low risk short setups when price action confirms. However, given the strong bullish reversal yesterday, I am looking for potential low risk buy setups. There should be good initial support on any weakness in the low 80s. If there is no weakness, look for breakout trades ABOVE 4405 targeting the previous highs up at 4420 and beyond. Note we are coming into month and quarter end, and there may well be some strong window dressing coming into this.

XJO Daily:

Bullish reversal candle right out of the upward sloping trendlines. 

SPI 15mins:

This is the early resistance zone today. Breaks of 4405 open up a retest of the previous highs. 

OZ Stockwatch

Eco Calendar:

11.30am AUS    Private Sector Credit (MoM and YoY)

Corp Calendar:

MTU: Ex-Div

SGM: Ex-Div

Analyst Rating Changes:

ORE:  Cut to hold from speculative buy at Byron Capital Markets; PT A$2.40

News:

BTU: FY loss widens to A$21.52m from A$13.48m loss yr ago

CTX: The company confirms the Kurnell refinery closure in 2014

EGP: Larry Mullin has been ousted as the chief executive of Echo Entertainment Group, with the casino operator attempting to repair its rapport with the New South Wales government. The move shocked some of Echo's institutional investors.

ORG: The company and Conoco are starting a process to sell APLNG project stakes. (AFR)

SDL: Trading Halt

Technical:

-Price/Vol scan and Bullish price action: AZH, BHP, BUX, CBA, MML, NCM, RIO, and SFR

-Upside Breakouts plays: AWC, AZH, AUT, CBA, MBN, NHC

-Downside Breakdown plays: AAX,

Stock Charts of Interest

Please feel free to contact me if you would like help or assistance in interpreting the graphs below. You can also follow me o twitter @FP_markets for live commentary throughout the day.

XMJ Daily: Retest of key trendline

Breakout and retest of this downward sloping trendline. This should be a significant zone of support and potential reversal area. 

BHP Daily: Strong base pattern and confirmed breakout

Breakout from a strong base pattern and retest of support. This is a great low risk setup for those looking to join a possible new trend higher. A risk would be on a close back below 33.00

NCM Daily:
Retest of strong support at 27.50 to 28.00. There was a bullish reversal yesterday and this could be the beginning of a retest of the recent highs at 30.00 and beyond. 

CBA 60mins: Breakout trade

CBA broke out strongly yesterday above the 55.50 zone. This opens up a potential retest of the previous highs. 

AUDUSD 60mins:
Price has broken out above this downward trendline and recaptured the 1.04 zone. This is a sign of genuine strength and a short covering rally could fuel a move back into 1.0520 and beyond. 

If you would like to chat live and interact daily with a Senior FP Markets trader, please go to http://www.cfdtradersedge.com.au/. In his lives chat room up to 50 full and part time active traders share market observations throughout the trading day. This is an invaluable source for active ASX traders.

 

 

 

 

Contact:
Austin Mitchum. Senior Market Analyst

First Prudential Markets

Email: a.mitchum@fpmarkets.com.au
Office: +61 2 8252 6800 Ext 120
Mobile: +61 0431547026

Are Currencies A Lead Indicator?

FX Report

There was some very interesting price action in FX markets overnight. Indeed, despite a strong breakdown in European equity markets and a weak US trading session, the Aussie and Kiwi actually traded higher! This is bullish price action to me and indicative of a potential turning point ahead. The Euro was the fly in the ointment as it broke down through the 1.29 level on continued uncertainty about the health of Spain as pressure mounted on the country to seek international assistance to face rising borrowing costs. 

From a technical perspective, the recent pullbacks in the Kiwi, the Australian Dollar and the British Pound all look corrective to me off the recent highs. This implies breakouts back to the upside in coming days. Please look at the charts and the setups below for possible triggers. A move back above 1.29 in the EUR would also be a very encouraging development and imply a failed breakdown.

Yesterday I said that I didn’t have a clear setup in the Australian Dollar in the short term. No doubt, the bigger picture chart still looks very constructive to me if we can breakout above 1.06 but we are obviously yet to see this. Sometimes, it is important to step aside and just wait for more information rather than force trades. Overnight, the Aussie hit the 61.8 Fibonacci support level shown and looks to be building a solid base. If price can regain the 1.0430 level as shown in the chart below, this would be a sign of strength I believe.

AUDUSD Daily:
The Aussie remains within this bigger picture sideways and consolidation pattern. However, there was a possible bullish reversal out of this upward trendline overnight. A breakout above the 1.06 level would confirm a bigger picture move into 1.10 and beyond. 

AUDUSD 60mins:
The 1.0340 long scalping level I highlighted yesterday worked well for short term traders. The whole move off the high looks like an overlapping wedge and thus potential breakouts to the upside are around the corner. A move back above 1.043 would indicate a more meaningful turn to the upside. I believe there was a lot of traders who sold this pair on the breakdown through 1.040, and they may well be forced to cover adding fuel to a rally should we see further strength.

NZDUSD Daily:
The Kiwi remains one of the strongest pairs globally against the USD. This strength is shown by the breakout above the downward trendline and the previous swing high Furthermore, all the moving averages are sloping upward thus traders should look for continued retracements back into this strong trend. 

NZDUSD 60mins:
Price is retesting the previous breakout zone and this offers a potential low risk entry into the trend. I think the corrective move off the high is complete with a low at 0.8180. Thus traders could look for breakout trades to the upside with stops below this level. 

EURUSD 60mins:
Yesterday I said that “the EURO is still holding the 1.29 level but is looking increasingly vulnerable to a breakdown. Traders could look to sell on breaks of this level with tight stops targeting 1.28”.

Price did breakdown but there has been very little follow through to the downside. Thus a move back above 1.29 would be bullish indeed and imply a false break. Traders who are short could use breakouts above here as a potential stop level.Note the bullish momentum divergences in place i.e. price making lower lows but momentum not following through. This implies a potential trend change.

EURJPY Daily:
EURJPY has entered into a very interesting support area to me. Clearly this market has transitioned from downtrend with lower lows and lower highs (as shown) to a new uptrend. This new uptrend was confirmed on a move above the June highs. Thus, this pullback into the upward trendline and moving averages should be well supported and offer a potential low risk entry into the uptrend. 

ASX Equity Morning Report 27/09/2012

My observations below should be viewed as general advice and may not be right for you.

Overnight Market Snaphot

US Equities began the session on a down note after Spain and the country's fiscal struggles were put back in the spotlight. The major indices made session’s lows during the first hour before reversing and attempting a return to the unchanged line. However, due to the lack of catalysts, the major averages were unable to sustain a meaningful rally. As a result, the S&P 500 slipped 0.6%. The Nasdaq underperformed and settled lower by 0.8%.

On a more positive note, it was interesting to note the strong bullish turnaround in Commodities. Indeed, Gold futures collapsed from 1760 to a low of 1738.90 before staging a positive recovery to settle at 1755, almost erasing all losses. There were similar moves and recoveries in Copper and Crude Oil. To me this looks like capitulations lows and may mark an important turning point.

Traders in Australia should note that Iron Ore was positive overnight and closed at $104.2, +0.48%

From a technical standpoint, certainly there are increasing warning signs of a potential short term peak. However, US indices remain the strongest globally and as I have continued to stress, only a break back below 1420 would indicate that this uptrend is over. Thus, this 1425 to 1430 zone could provide a great low risk buying opportunity for traders coming into tonight.

S&P500Daily:

 

Emini S&P500 December Key Levels:

Support Levels: 1430/1425, 1410

OZ Stockwatch

Eco Calendar:

11.30am AUS  3-Months Job Vacancies Data

News:

AIO: Bad weather, absentee workers and the postponement of new equipment has forced Patrick Stevedores, a subsidiary of logistics group Asciano, to temporarily halt container movements at Port Botany in New South Wales. Export loading volumes have been cut to 85 percent of customers' average volumes for their last four trips until Patrick's cranes regain full capacity

LYC: Rare earths producer Lynas Corporation (LYC) yesterday said that a decision by the High Court in Malaysia to postpone the temporary license for its controversial processing facility in the Southeast Asian country would not affect production. "The interim order is not anticipated to impact on Lynas's planned schedule because Lynas has planned for first feed to kiln at the Kuantan plant after 4 October 2012," the miner said in a statement. 

MINING: Elmer Funke Kupper, chief executive of the Australian Securities Exchange (ASX), yesterday remarked that the mining industry should receive tax incentives from the Federal Government in a bid to prevent an early end to the mining boom. "We look at the [mining] investment pipeline of a couple of hundred million dollars. That all sounds great, but for traditional mining companies in iron ore and gold and so forth, life is not so easy and we are not competitive enough as a country," he added. 

NAB: Mark Joiner, chief financial officer at National Australia Bank (NAB), yesterday told an audience in Melbourne that stricter global regulations and a pessimistic view by global credit ratings agencies would hamper banks' ability to expand their lending books. "In my view, the Australian banks, for a long time, will only be able to buy the asset side of their balance sheet dollar for dollar with what they bring in on the customer side, Mr Joiner said. 

ORE: The company said that Toyota Tsusho Corp is buying a 25percent stake in its project in Argentina. The Canadian listing closed +10% overnight.

SWM: The appointment of Don Voelte as chairman of oil and gas producer Nexus Energy,  has raised concerns about how much longer he will remain as chief executive of conglomerate Seven West Media. (AFR)

WHC: Largest shareholder Nathan Tinkler is looking for increasing control on the board so that he may remove some directors and push plans for asset sales. (AFR)

Technical:

-Price/Vol scan and Bullish price action: BUX, CBA, TLS

-Price/Vol scan and Bearish price action: AGO, LYC, MYR, MGX, OZL, WPL

-Upside Breakouts plays: AZH, AUT, CBA, MBN, NAB, NHC, ORE, SFR, TLS

-Downside Breakdown plays: AAX, AGO, LYC, MND, and WPL

Whats Your Plan Tonight?

My observations below should be viewed as general advice and may not be right for you.

So the market has now given back most of the euphoric gains post the announcement of QE3. On first take that would appear to be rather bearish and a classic "buy the rumour, sell the news" event. 

However, as I have continued to highlight in my reports, the S&P500 is in a strong uptrend having broken above the April 2012 highs. Thus as long as the market holds this key 1420 key marker, I believe traders could continue to focus on retracements into this uptrend. I have no idea if this is the "top". All I can say is markets take time to transition from strong uptrends into new downtrends. We will soon learn if the character of this market has genuinely changed if we cant hold in here. 

So coming into tonight, I see a key zone of support in the 1430 to 1435 area in the Emini S&P500. I think the ideal setup would be a bit more panic into this area come the open with a swift bullish reversal. 

The major warning sign to me is the Eurostoxx Daily chart which could be a potential ending wedge type setup. The key support area there is 2530 with 2500 a line in the sand (similar to my 1420 S&P500 level)

So here are the setups I am looking at tonight:

Eurostoxx Dec 60mins:

Price couldn't breakout above that downward trendline overnight. The pattern still appears to be a triangle type setup and price is now testing the low end of the range at 2530. Short term traders could look for buy setups into the low end of the range if we start seeing confirmation. 

Eurostoxx Cash Daily:

Potential ending wedge type pattern. However, 2500 remains key short term support. 

Emini S&P500 15mins:

A potential ABC type pattern into key support. Look for bullish hammers and confirmation out of this zone. 

S&P500 Daily:

Trendline support coming into tonight

And here are the FX setups on my radar: http://fpmarkets.blogspot.com.au/2012/09/fx-report.html

Thanks

Austin