ASX Equity Morning Report 21/09/2012

Overnight Market Snaphot

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

 

US stocks got off to a rather weak open due to bearish global economic data and losses in European trading. Indeed, Japan reported a wider-than-expected trade deficit while the French and Eurozone PMI readings were well short of expectations. However, after marking session lows thirty minutes into the trading day right out of my key 1450 level, the major averages set off on a day-long climb towards positive territory. As a result, the S&P 500 finished flat and the Dow Industrials closed in positive territory +0.14%.

As I said yesterday,

“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.”

This played out to a tee last night with strong buying at the 1450 zone. I do believe there is potential for further gains into the previous highs to finish the week and coming into Triple Witching today. This is the expiry of stock options, index options and index futures. Usually the market is rather well supported into this event.  

On a side note, please read an educational piece I put up yesterday: http://fpmarkets.blogspot.com.au/2012/09/what-is-your-strategy.html

S&P500 15mins:

A small breakout from this short term consolidation pattern but no real follow through yesterday. 

Emini S&P500 September Key Levels:

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

Resistance Levels: 1475/1480, 1515

ASX200 and SPI Analysis

My SPI Range today: 4395 to 4435. Outlier levels 4385 support and 4450 resistance.

My SPI plan today: SPI futures closed at 4417 overnight after hitting a low of 4390.

The market remains in a short term uptrend and remains well supported at the 4390/4400 level. As long as this level can hold early today, I still believe the risk is to the upside and a retest of the 4450 May highs is on the cards.  No doubt some stocks are beginning to look tired after recent strong run ups but I am not seeing any climatic topping patterns (Energy sector aside). 

My key early short term support zone is 4405 to 4410. I am looking for dips into this support zone for possible long setups. Any failure to hold this zone early opens up a retest of 4390 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:

The market is testing and holding a key support level here. The trend remains up as long as this can hold and I am looking for short term targets into 4450.  

OZ Stockwatch

Eco Calendar:

10am:   AUS     Conference Board Leading Index

Corp Calendar:

PMV: FY earnings

SIP: Ex-Div

SXL: Ex-Div

Analyst Rating Changes:

CDD: Raised to strong buy from buy at BBY; PT A$9

GNC: Raised to ’Overweight’ at JPMorgan
RIO: Cut to ‘hold’ at Liberum

News:

AQP: To be removed from S&P/ASX 200 Index post-mkt (Bloomberg)

BBG: United States-based private equity firm Bain Capital yesterday announced it was abandoning talks to acquire Billabong International, a move that saw investors push the latter's stock down by more than 7 percent to A$1.32. Bain reportedly told Billabong's board that it could not justify the economics of the deal, leaving rival private equity firm TPG Capital as the sole bidder for the Australian company.

BHP: Global miner BHP Billiton yesterday announced that the companies would be postponing more than US$5 billion of port and rail infrastructure projects in Queensland while they conducted a broader assessment of their coking coal operations.  BHP, along with its Japanese partner Mitsubishi, cancelled an expansion of the Peak Downs coking coal venture and shut down their Gregory and Norwich Park miners in the state earlier this year.

FMG: The decision by iron ore producer Fortescue Metals Group to spend US$715 million to reacquire royalty rights  from its operations in Chichester, which is scheduled to be capable of producing 95 million tonnes of iron ore annually, could make it easier to sell the asset, according to analysts.  Nev Power, chief executive of Fortescue, said that the group would not rule out the possibility of selling small portions of core assets but it would be dependent on long-term assessments.

MYR: CEO Bernie Brookes sells 604,428 shares for A$1.1m

STO: A move by the Japanese government to radically alter the pricing framework for the liquefied natural gas sector could limit the development of Australia's gas sector, producer Santos said yesterday.  "What's needed for shale gas to be successful is both the scale and development of infrastructure to bring that gas to market it is Asia that is driving this infrastructure pipeline in Australia, and in particular the ability to secure long-term supply contracts to Asian customers at oil-linked prices," Santos Asia Pacific vice-president Martyn Eames said (Australian)

PAN: Last trading opportunity in S&P/ASX 200 Index

Technical:

-Price/Vol scan and Bullish price action: AMX, AWC, MBN, SLX

-Price/Vol scan and Bearish price action: AAX, MAH, NWH, ORG, WPL

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.

WPL Daily: Breakdown through support and possible topping pattern. 

ORG Daily: Breakdown through support and confirmation of trend lower.

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

AUDUSD
It was all looking rather weak for the Aussie yesterday with the price breaking below 1.04 after Chinese manufacturing declined for an 11^th month, clouding the prospects for the nation’s resource exports. However, despite breaking through 1.04, the market failed to pick up any additional selling and price recovered to close at $1.0436 in New York. This was encouraging to me and indicative of a “failed breakdown”. There were a number of sell stops under that 1.04 level which appeared to shake out weak hands. 

From a technical perspective, as long as the Australian Dollar can hold above last night’s lows of 1.0380, I believe there is potential for continued strength and a resumption of the uptrend. Confirmation will come on a breakout ABOVE 1.05 as I stated yesterday.

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

AUDUSD 60mins:
There was an attempted breakdown through my support zone yesterday however there was no follow through to the downside. This potentially sets up a bear trap but I would want to see more strength for 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