ASX Equity Morning Report 17/09/2012

Overnight Market Snaphot

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

  

US indices started on a positive note with broad gains across stocks post the FOMC meet and the announcement of QE3. However, the major averages marked their respective session highs during the first hour of trade and drifted lower for the remainder of the session. Afternoon selling pressure increased slightly after Egan Jones lowered the credit rating of the U.S. from ‘AA' to ‘AA-‘ (Briefing.com).  Looking at the major indices, the Nasdaq led the way with a 0.9% gain while the Dow and S&P 500 added 0.4% each. 

So early September has brought a number of major announcements and measures by Global central banks to inject liquidity into the system and buoy risk assets. There is one little problem remaining which is in the guise of Greece. However, on the whole these interventions and promises of “unlimited” support have clearly been well received by the market and removes many of the headwinds the market was facing. Whether or not this resolves the debt situation in Europe or the unemployment situation in the US is another thing, but for now there is genuine momentum behind this move across risk assets and this could well continue into year end as investors chase performance. 

From a technical standpoint, the US markets have surged beyond their previous 2012 highs and this is a sign of underlying strength. Fridays trading looked to mark short term exhaustion with resistance at 1475 to 1480. However, the trend is clearly up and there is genuine strength behind this move, thus traders should continue to look for dips into the uptrend. 1450 should offer strong support and is the target for any pullback.

S&P500 Daily:

S&P500 Emini Key Levels

Support Levels: 1450, 1440, 1420/25

Resistance Levels: 1475/1480, 1515

ASX200 and SPI Analysis

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

My SPI Range today: 4390 to 4435. Outlier levels 4450

My SPI plan today: SPI futures closed at 4412 on Friday night after reaching a spike high of 4430. Emini S&P500 futures have opened unchanged at 1465 and the Australia Dollar is slightly weaker vs. Friday’s close.

As per the Daily chart shown below, we are now approaching the top end of the range. However, until we see a clear distribution pattern or topping formation, I believe traders should continue to focus on the trend. Like many out there, I am hoping that the various central bank measures are the catalyst to send the ASX200 out of its recent range. However, we need to seen clear confirmation and breakout signals first.

Today I am looking for early support into the low 4400 region. Traders could look to scalp 4405 and 4400 on the long side. Any break below 4395 would invalidate this setup. A low was made at 4380 on Friday and any stronger than anticipated sell off today should be capped at that level. On the upside, targets for long traders are into 4430/4435. Breakouts above here open up a possible move into the previous ASX200 highs at 4450 so keep this level on your radar.

XJO Daily:

The market remains in a solid uptrend but needs a confirmed breakout above the top end of the range to confirm a more meaningful move higher.

SPI 15mins:

The SPI hit my target zone after breaking out of the recent consolidation pattern. Given Fridays trading, the market has now pushed beyond this target zone and thus traders should continue to focus on the uptrend into 4450 and possibly beyond. 

OZ Stockwatch

Eco Calendar:

11.30am AUS    New Motor Vehicle Sales

Corp Calendar:

IFO:      FY results

BXB:    Ex Div

CSL:     Ex-Div

CTX:     Ex-Div

FLT:      Ex-Div

MIN:     Ex-Div

PRY:    Ex-Div

News:

AQP: halted operations at its Kroondal mine in South Africa amid rising tensions in the region.

               

FMG: Fortescue Metals Group may as early as today announce that it has persuaded financiers to waive some of the covenants on a portion of it’s A$8.5 billion debt.  The iron ore producer has been formulating a plan to present to banks this week but the proposal has not been shown to shareholders or financiers. (AFR)

LEI: Observers have begun to question how much control Leighton Holdings has over its own management, after the head of the firm's Middle Eastern division, Laurie Voyer, was replaced
by an executive from Leighton's Spanish parent, Grupo ACS.

MINING: Australia’s standing as a viable coal, iron ore and base metals producer is under serious threat, jeopardising $121bn a year in resources revenue in the next two decades according to a report prepared for the Minerals Council of Australia. High resource wages and productivity declines mean Australia has lost its competitive advantage over emerging miners .The report’s author is Port Jackson Partners. (AFR)

MYR: Bernie Brookes, chief executive of Myer, yesterday announced that while less than 1 percent of the luxury department store's sales are generated over the internet, he expected that number
to soar to 10 percent by 2017.  Mr Brookes added that some "marginal" or "non-performing" outlets would be shut down before they started making a loss. (The Age)

PDN: John Borshoff, chief executive of Paladin Energy yesterday said that uranium producers would benefit from Japan's decision to restart its nuclear reactors, with Japanese utilities preparing to re-activate contracts that were previously "on-hold". 

PNA: The company and Codelco will delay a copper and gold mining project in northern Chile because of high electricity costs, El Mercurio’s online newspaper reported.

RIP CURL: Surf, street and skate wear brand Rip Curl has been placed on the market, with financial services giant Bank of America Merrill Lynch appointed to examine a partial or full sale of the group.  Brian "Sing Ding" Singer and Doug "Claw" Warbrick could make more than A$100 million each from the sale if the company is sold for around A$400 million, although observers expect the final sale to be closer to A$300 million. (AFR)

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.

GRY Daily: Breakout from a strong base pattern.

NST Daily: Breakout from a flag pattern at the top end of the range

MML Daily: Retracement trade and subsequent breakout

BHP Daily: Strong base pattern and potential breakout

AUDUSD
The Australian Dollar continued its recent strong rally on Friday night, retesting the previous August highs in the 1.06 region. However, the Aussie was unable to hold onto gains and grinded lower out of this resistance level to close at 1.055 come the close of New York Trading.

From a technical standpoint, I put out a Blog post on Friday night going into some detail into the potential next moves for the Australian Dollar: http://fpmarkets.blogspot.com.au/2012/09/where-to-next-for-battler.html. In sum, there is the potential for a bigger picture breakout up to the previous 1.10 highs and even beyond into 1.20. No doubt this will take time to play out. 

In the short term, the market is trading in a range from 1.05/1.0520 to the 1.06 resistance level. I believe traders should continue to look for pullbacks into the support zone cited to join this uptrend. 1.0420 has now become a line in the sand for the bulls.

AUDUSD Daily:
This is the bigger picture triangle pattern I am looking at. Price is now testing key resistance. 

AUDUSD 60mins:
This is the short term range. Traders could either look to buy support at 1.05/1.0520 or wait for clear breakouts above the top end of the range i.e. 1.06. Only a close back below 1.0420 would be bearish now. 

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