ASX Equity Morning Report 18/09/2012

Overnight Market Snaphot

 

Stocks took a breather overnight after the recent sizable rally. The S&P 500 slid 0.3 percent to 1,461.19 and the Dow Jones Industrial Average dropped 40.27 points, or 0.3 percent, to 13,553.1. 

Healthcare stocks outperformed the broader market on strength in biotech companies whilst the material stocks underperformed. Indeed, the SPDR Materials Select Sector ETF slumped 1.5% as steel producers lagged after a series of downgrades (Briefing.com). AK Steel, Reliance Steel & Aluminium and United States Steel all posted losses between 4.5% and 7.0% after JP Morgan downgraded shares of the steelmakers from ‘overweight' to ‘neutral.'

There was a rather dramatic bearish reversal in Crude overnight. Crude oil touched a session high of $99.52 per barrel in the morning but pulled back into negative territory by afternoon floor trade. The energy component then slid over 4 points in almost a straight line to a session low of $94.65 per barrel. The weakness in crude oil has been attributed to a number of factors, including rumours of a strategic oil reserve release (which have since been denied by the White House), along with chatter of a potential "fat-finger" trade, in combination with light volume and a break of technical levels. Crude erased some of the loss but still settled 2.4% lower at $96.52 per barrel.

Yesterday I wrote:

“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.”

There was no retest of the 1475 spike high and price looks to be correcting lower. Thus, traders could look for pullbacks into this 1450 support zone for low risk long setups into this upward trend.

Emini 15mins:

Looking for dips into the low 1450s. Only a break back below 1440 would concern me for now. 

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: 4380 to 4420. Outlier levels 4450

Please note that the SPI September futures contract expires this Thursday.

My SPI plan today: SPI futures closed at 4397 overnight after hitting a high of 4412. Fair Value is currently at 2 points.

There is a key zone of support at 4380 to 4390 first thing and this offers a potential low risk buy opportunity for traders. The trend remains up and there are no signs of a topping pattern yet. Thus I favour looking for dips into this uptrend. This risk to this scenario would be a breakdown through this 80 zone opens up a deeper move lower into 4355/4360. The first target for any early rally is up to 4415/4420. This level should be well offered early on but breakouts above here in due course open up a retest of the ASX200 previous highs at 4450.

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 is consolidating at the top end of the range. This is positive as long as 4380 holds. Breakouts above this pennant pattern open up a retest of the ASX200 highs at 4350 area. 

OZ Stockwatch

Technical:

-Price/Vol scan and Bullish price action: BHP, BDR, CSR, GRY, ILU, LEI, MBN, MCR, MML, and SFR.

-Price/Vol scan and Bearish price action: AGK, ASL, CCL, CSL, RHC, SHL.

Eco Calendar:

1130     AUS     Sep     Monetary Policy Meeting Minutes

Corp Calendar:

NHC:    Prelim Results

TOL:     Ex-Div

News:

AUD: As many as 23 central banks around the world include the Australian dollar in their foreign currency reserves, a sign observers say highlights the importance of the currency for global investors.  The revelation was uncovered in an internal Reserve Bank of Australia document published yesterday under freedom of information laws

GAMERS: Frederic Luvisutto, managing director of The Star casino in Sydney, yesterday said that revenue growth at the property had surged over the last quarter thanks to new gaming areas and
restaurants, helping the casino recover from a run of bad press earlier this year. (AFR)

 FMG: The Company resumes trading today. Investors yesterday said that Fortescue Metals Group
should be able to avoid violating its loan covenants after the spot price of iron ore recovered, with a source saying that Fortescue was expected to announce soon that it had gained some relief from its obligations (THE AGE).

MAH: Mining services group Macmahon Holdings today is expected to announce an earnings downgrade only four weeks after predicting profits would grow by 20 percent for the 2013 fiscal
period.  The company, which builds resource, marine, rail, bridges and road infrastructure, admitted that prospects for new business were unclear.  Shares in the group entered a trading halt yesterday,

NINE: Sources yesterday said that Nine Entertainment Co and its parent company, private equity firm CVC Asia Pacific, have four  weeks to negotiate a settlement with financiers to restructure the media conglomerate's A$2.8 billion debt.  Should talks collapse, the company could be placed into receivership and be offered to potential suitors (AUSTRALIAN)

SHL: Healthscope and Sonic Healthcare yesterday said they had jointly agreed to scrap the transferring of Healthscope's pathology business in the Australian Capital Territory and New South Wales to the latter, because of the Australian Competition and Consumer Commission's lengthy delay
in ruling on the deal.

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.

Strong price action once again yesterday. The target for this move is up to 1.00 in the short term.

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

Confirmed breakout to all time highs. A stock making all time highs in this environment is a sign of underlying strength.

BHP Daily: Strong base pattern and confirmed breakout

Targets for this move are as high at 37.50 to 38 in due course. Risk would be on a close back below 33.00

SFR Daily: Breakout from solid consolidation pattern to all time highs.

Price has surged above this consolidation pattern to an all time high. This is a sign of genuine strength after a multi month consolidation pattern.

AUDUSD
Australia’s dollar lost 0.7 percent to $1.0473 overnight, its biggest decline in a month. The New Zealand dollar also declined 0.3 percent to 82.62 U.S.cents. It would appear that price has pulled back after such a strong run up and due to further broker downgrades regarding the Chinese growth outlook.
In the short term, the Auzzie has now pulled back into a great support zone at 1.0420 to 1.045. This could be formidable and a great low risk entry into the uptrend looking for a retest of the 1.06 resistance level. Only a confirmed breakdown through here would make me concerned regarding the bullish scenario.
The key event today will be the RBA minutes out at 11.30am

AUDUSD Daily:
This is the bigger picture triangle pattern I am looking at. Price tested key resistance and failed overnight. 1.06 becomes a key marker and breakout level. 

AUDUSD 60mins:
The 1.050 level failed to hold overnight and the Australian Dollar is now testing the previous breakout level at 1.042 to 1.045. This is an important line in the sand for bulls and could offer a great low risk long entry into the trend. 

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