ASX Equity Morning Report 04/09/2012

Overnight Market Snaphot

 

US markets were closed yesterday due to the Labor Day holiday. European stocks registered gains across the board and the U.K’s FTSE 100 increased 0.8%, France’s CAC 40 rose 1.2% while Germany’s DAX climbed 0.6%. Offshore markets took a positive lead from Asian trading, where an unexpected decline in Chinese manufacturing boosted speculation that the government will announce further stimulus. The volume of shares changing hands in Stoxx 600 companies was 35 percent lower than the 30-day average (Bloomberg). Once again it is important to note that the Australian Dollar failed to join the move higher and languishes just off its overnight lows at 1.0245. 

This week will be dominated by European debt auctions and the ECB meeting on the 6^th September where President Mario Draghi may reveal details of a new bond-buying program.  Spain, France, Austria and Belgium return to the debt market after a month long pause, with Germany also selling debt. 

From a technical standpoint, the low end of the recent ranges were tested and held on Friday. The Emini S&P500 hit a low of 1397 and has once again bounced strongly off this level yesterday. Thus this now becomes a marker going forth. Despite the deteriorating technical backdrop, the S&P500 remains in an uptrend and I believe the inability to breakdown in the short term implies a potential retest of the recent highs in coming days. The upside target for any bounce is up to 1420/1425. Only confirmed breaks now below 1397 would confirm a possible pullback and deeper correction.

Emini S&P500 60mins:

Price tested the low end of the range at 1397 on 2 occasions and was met with strong buying. The short term pattern increasingly looks like a triangle and consolidation setup of some sort. Breakout traders need to see strong breaks above 1415 for a target into the previous highs at 1425.  

S&P500 Emini Key Levels:

Support Levels: 1400/1395, 1350

Resistance Levels: 1410, 1420/1425

OZ Stockwatch

Eco Calendar

11.30am            AUS Current Account Balance (Q2)

2.30pm             AUS Interest Rate Decision       

Corp Calendar

ACR:    Ex-Div

BLY:     Ex-Div

ILU:      Ex-Div

Analyst Rating:

AGO: Cut from “Buy” to “Neutral” at Citigroup. Cut price target from $2 to $1.50.

GMD: Cut from “Buy” to “Neutral” at Citigroup. Cut price targets to 40c.

WSA: Cut from “Neutral” to “Sell” at Goldmans. Price target $4.25

News:

AMP: Bank of Tokyo-Mitsubishi UFJ, one of the largest lenders in Japan, is in talks with AMP Bank and other local mid-tier banks about offering an alternative to current wholesale funding arrangements (AFR).

Gold Explorers: Gold extended its rally overnight to a 5month high. Keep the explorers on your watchlist namely IGR, GRY, KCN, NCM, OGC, and SLR.

Mining: The Australian Bureau of Statistics yesterday announced that expenditure on mining exploration for the three months to June was A$1.02 billion, $53 million lower than the quarter
prior.  Observers noted that the result was the first drop in more than three years and was caused by softening in the Western Australian and Queensland economies. 

Retail: The Australian Bureau of Statistics yesterday published figures showing a poor month for the retailing sector, with overall sales falling by 0.8 percent and sales at department stores dropping by 10.2 percent.  Two-thirds of the 15 industries reviewed by the bureau recorded lower profits for July.

Technical

The following stocks are now testing their respective levels. I have derived these levels using my own discretion and please contact me if you would like me to describe and expand upon this analysis. 

-Price/Vol scan and Bullish price action: IGR, MML, PEX, SIR, SLR

-Price/Vol scan and Bearish price action: EWC, MAH, and MND

  

ASX200 and SPI Analysis

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

My SPI Range today: 4320 to 4365

My SPI plan today: SPI futures closed at 4345 this morning. Fair Value is now only -1.5 therefore the XJO is indicated at 4347 approximately first thing. 

Yesterday the market sold off strongly on the back of the weaker than expected PMI numbers. Key supports where tested at 4290 and the market showed great resilience. If ever there was a moment for a market to breakdown that was it with a combination of weak commodity prices, broker downgrades and weak figures out of China. However, the market held in nicely and this leads me to believe we may see an attempted push higher in the next few days to re-challenge previous highs. Key to this will be breakouts above 4345/4350. 

Today there still remains a strong resistance zone at 4340 to 4350. Thus, short term traders could look to short fade this resistance zone early and if the market fails to follow through to the downside, be prepared for breakout trades to the upside. The target for any early weakness is down to 4325/4320 and this should provide a low risk long entry. 

Note it is the RBA minutes today at 2.30pm. The expectation is an unchanged decision.

XJO 15mins:

This is the resistance zone coming into today. Note that the pattern looks like a clear ABC off the high. This is a corrective pattern and implies a new trend higher is underway with the first target up to 4400. In the bigger picture, there is still solid resistance at 4400 to 4450 on the Daily chart.

SPI 15mins:

Potential breakout trades above 4350 today.

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 on twitter @FP_markets for live commentary throughout the day.

BKN Daily: A breakdown trade

A solid breakdown through the 6.00 support level. This opens up a potential retest of the swing lows at 4.60. Yesterday was an inside day thus breaks of Fridays low could lead to increased momentum to the downside. 

MAH Daily: A breakdown trade

A failed breakout above the 63c neckline. A break of the upward sloping trendline in the coming days would be bearish and open up a potential move to 50c and lower

SLR Daily: A breakout trade

Price retest the previous breakout zone and held support. Yesterday there was a strong gap up with price closing strongly. This opens up a potential move all the way up to the previous highs. A risk would be if yesterdays gap closed.

NCM Daily: A setup for the trend follower

Price has now pulled back into strong support and the upward trend. Risk for the bulls would be a meaningful close below 24.50

AUDUSD
Despite the move higher seen in overseas equity markets, the Australian dollar failed to follow through meaningfully to the upside. A high was made at $1.026 and price has retraced to finish at $1.024. 

From a technical standpoint, the analysis and outlook I have provided here continues to play out. AUD remains in a short term downtrend and has triggered a short term Head and Shoulders topping pattern. However, no doubt we are entering into a solid support zone and the first target for this move. Thus, those traders with open short positions should be looking to tighten up risk into here. There is no signal yet of an imminent bounce but certainly the trend is beginning to look oversold in the short term.

AUDUSD Daily:
Price is now entering the Target zone and strong support

AUDUSD 60mins:
The short term trend remains down but no doubt it is beginning to look oversold in the short term. 

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