ASX Equity Morning Report 20/09/2012

Overnight Market Snaphot 

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

 

As I left the office yesterday, it was all looking rather positive. However, the bounce across risk assets failed to push higher meaningfully overnight. US equities began the session on a higher note after the Bank of Japan raised its asset purchase target to 55 Trillion YEN from 45 Trillion in an attempt to inject additional liquidity into the market and to weaken the yen. Stocks were also boosted slightly by positive economic data which indicated an uptick in existing home sales as well as building permits (Briefing.com). However, late day selling pushed the major averages off their best levels of the session as the S&P 500 settled higher by 0.1%.

Interestingly, the energy sector underperformed the broader market once again with oil sliding another 3.6% to continue its recent weakness. The energy component has fallen nearly 9.0% since last week. The Department of Energy reported that during the past week oil inventories saw a build of 8.534 million barrels against expectations of a build of 1.4 million.

From a technical standpoint, I continue to focus on the short term support zone at 1450/1455 in the S&P500. As long as this zone can hold, I believe a retest of the recent spike highs at 1475 is likely before a more meaningful bearish turn. The bigger picture trend remains up with a strong breakout above the April 2012 highs. Despite stocks appearing slightly overextended in the short term, I can see no clearly topping or distribution pattern yet.

S&P500 15mins:

Emini S&P500 September Key Levels:

Support Levels: 1450/1455, 1440, 1420/25

Resistance Levels: 1475/1480, 1515

ASX200 and SPI Analysis

Today is the SPI September futures expiry. From now on I will be quoting the December contract.

My SPI Range today: 4400 to 4450. Outlier levels 4390 support.

My SPI plan today: SPI futures closed at 4417 overnight after hitting a high of 4434. 

Yesterday I was looking for a breakout above 4400 and we got it, with some positive momentum for most of the trading session. This breakout extended overnight to hit my 4430 target.The key question is obviously whether we can sustain this run and can the positive momentum continue? I do think the ASX200 is likely to test its previous May 20212 high at 4450 in the short term before a more meaningful turn. Certainly we are seeing a number of breaking patterns and momentum plays really gaining traction and this does bode well for an eventual breakout in time. However, no doubt this is the top end of the range and traders do need to be wary of this. 

My key early short term support zone is 4410 to 4415. Similar to yesterday, I am looking for dips into the trend and support zones for possible long setups. Any failure to hold this zone early opens up a retest of 4400 which should be strongly defended. On the upside, the targets for any early strength are into 4430/4435 which was my cited target yesterday. However, I do think we can continue to break through this and challenge the 4450 highs in times. Traders looking for a climatic reversal should use bearish confirmation out of the 4445/4450 zone for possible short setups.

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. We are now testing the May 2012 highs. 

XJO 15mins:

Breakout from the consolidation at the top end of the range. This is a sign of strength. Only breakdowns back down below 4380 would put this short term uptrend in jeopardy.

OZ Stockwatch

Eco Calendar:

11.30am AUS    RBA Bulletin

12.30pm CHINA HSBC Manufacturing PMI (Sept)

Corp Calendar:

KMD: FY Results

Analyst Rating Changes:

AGK: Raised to buy from neutral at Citigroup; PT A$16.40

MAH: Cut to ’Hold’ at Moelis & Company
MAH: Cut to ’Underperform’ at BBY Limited
AGO: Cut to ’Neutral’ at Macquarie
GRR: Cut to ’Neutral’ at Macquarie
ILU: Cut to ’Neutral’ at Macquarie

News:

AQP: Zimbabwe says majority of foreign-owned platinum mines meet ownership law

CGA Mining: Canadian gold producer B2Gold has acquired Perth-based peer CGA Mining for C$1.1 billion.

DJS: Luxury department store David Jones  yesterday announced a staggering 40 percent fall in full-year profits to  A$101.8 million, adding that it may also consider selling its four flagship properties in Sydney and Melbourne's central  business districts.

EGP: Genting Singapore to sell entire 4.8% stake in Echo at A$3.99 a piece

FMG: Rating of its senior unsecured bonds will probably be cut on new loan deal S&P500 says (Bloomberg)

MAH: Nick Bowen, chief executive of Macmahon Holdings yesterday resigned from the mining and construction group after announcing a staggering profit downgrade that saw the firm’s shares fall by 38.7 percent to A32 cents.  The company predicted a 20 percent increase in earnings in its August results, but yesterday declared that it was expecting an after-tax profit of between A$20 million and A$40 million for the full-year. 

MYR: Nick Abboud, executive general manager of national store operations at Myer, yesterday resigned from the luxury department store, a departure that has concerned some institutional shareholders given that Mr Abboud was viewed as a potential successor to chief executive Bernie Brookes. 

Technical:

-Price/Vol scan and Bullish price action: AGO, AMX, GRY, IAU, LNC, MBN, NCM, SFR, SLR.

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

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 and thus we are almost there.

NHC Daily: Breakout from bullish consolidation pattern.

Yesterdays strong breakout candle triggered this base pattern. This stock has held up very well despite a weak coal price and the recent raising of Queensland royalties. A stock which can shrug off this kind of news is indicative 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

CCL Daily: Potential topping pattern.

 

AUDUSD
The Australian dollar advanced versus its U.S. peer as the Bank of Japan’s unexpected monetary
stimulus expansion boosted demand for higher-yielding assets. The Aussie gained against the majority of its 16 most-traded counterparts after Japanese policy makers added 10 trillion yen ($128 billion) in stimulus, following measures by the Federal Reserve and European Central Bank this month. Australia’s currency appreciated 0.2 percent to $1.0480 in New York yesterday after earlier falling as much as 0.4 percent to $1.0418. Interestingly, AUDJPY surged on the back of this announcement from 81.90 to 82.90 but has given back all its gains to close at 82.05. This is not healthy price action in my opinion.

In the short term, the Aussie pulled back into the great support zone at 1.040 to 1.0430 and bounced. As stated yesterday, this zone of support is formidable. A breakout ABOVE 1.05 is now needed for increasing momentum to the upside and a retest of 1.06 and beyond. For now, the short term price action is rangebound from 1.04 to 1.05.

AUDUSD Daily:
A breakout above this downward trendline is needed for confirmation of a more meaningful move higher. 

AUDUSD 60mins:
My support zone held yesterday with a small bounce. However, the price action thus far does not look particularly strong. Need to see a break above 1.05 as confirmation. 

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