ASX Equity Morning Report 27/09/2012

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

Overnight Market Snaphot

US Equities began the session on a down note after Spain and the country's fiscal struggles were put back in the spotlight. The major indices made session’s lows during the first hour before reversing and attempting a return to the unchanged line. However, due to the lack of catalysts, the major averages were unable to sustain a meaningful rally. As a result, the S&P 500 slipped 0.6%. The Nasdaq underperformed and settled lower by 0.8%.

On a more positive note, it was interesting to note the strong bullish turnaround in Commodities. Indeed, Gold futures collapsed from 1760 to a low of 1738.90 before staging a positive recovery to settle at 1755, almost erasing all losses. There were similar moves and recoveries in Copper and Crude Oil. To me this looks like capitulations lows and may mark an important turning point.

Traders in Australia should note that Iron Ore was positive overnight and closed at $104.2, +0.48%

From a technical standpoint, certainly there are increasing warning signs of a potential short term peak. However, US indices remain the strongest globally and as I have continued to stress, only a break back below 1420 would indicate that this uptrend is over. Thus, this 1425 to 1430 zone could provide a great low risk buying opportunity for traders coming into tonight.

S&P500Daily:

 

Emini S&P500 December Key Levels:

Support Levels: 1430/1425, 1410

OZ Stockwatch

Eco Calendar:

11.30am AUS  3-Months Job Vacancies Data

News:

AIO: Bad weather, absentee workers and the postponement of new equipment has forced Patrick Stevedores, a subsidiary of logistics group Asciano, to temporarily halt container movements at Port Botany in New South Wales. Export loading volumes have been cut to 85 percent of customers' average volumes for their last four trips until Patrick's cranes regain full capacity

LYC: Rare earths producer Lynas Corporation (LYC) yesterday said that a decision by the High Court in Malaysia to postpone the temporary license for its controversial processing facility in the Southeast Asian country would not affect production. "The interim order is not anticipated to impact on Lynas's planned schedule because Lynas has planned for first feed to kiln at the Kuantan plant after 4 October 2012," the miner said in a statement. 

MINING: Elmer Funke Kupper, chief executive of the Australian Securities Exchange (ASX), yesterday remarked that the mining industry should receive tax incentives from the Federal Government in a bid to prevent an early end to the mining boom. "We look at the [mining] investment pipeline of a couple of hundred million dollars. That all sounds great, but for traditional mining companies in iron ore and gold and so forth, life is not so easy and we are not competitive enough as a country," he added. 

NAB: Mark Joiner, chief financial officer at National Australia Bank (NAB), yesterday told an audience in Melbourne that stricter global regulations and a pessimistic view by global credit ratings agencies would hamper banks' ability to expand their lending books. "In my view, the Australian banks, for a long time, will only be able to buy the asset side of their balance sheet dollar for dollar with what they bring in on the customer side, Mr Joiner said. 

ORE: The company said that Toyota Tsusho Corp is buying a 25percent stake in its project in Argentina. The Canadian listing closed +10% overnight.

SWM: The appointment of Don Voelte as chairman of oil and gas producer Nexus Energy,  has raised concerns about how much longer he will remain as chief executive of conglomerate Seven West Media. (AFR)

WHC: Largest shareholder Nathan Tinkler is looking for increasing control on the board so that he may remove some directors and push plans for asset sales. (AFR)

Technical:

-Price/Vol scan and Bullish price action: BUX, CBA, TLS

-Price/Vol scan and Bearish price action: AGO, LYC, MYR, MGX, OZL, WPL

-Upside Breakouts plays: AZH, AUT, CBA, MBN, NAB, NHC, ORE, SFR, TLS

-Downside Breakdown plays: AAX, AGO, LYC, MND, and WPL

ASX200 and SPI Analysis

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

My SPI Range today: 

4335 to 4375. Outlier levels 4320 support.

My SPI plan today:  

SPI futures closed at 4349 overnight after hitting a low of 4337. Fair Value is currently 4points and thus the XJO is indicated around 4345

Yesterday I was looking for a bounce out of the 4340/4350 zone and this played out to a small degree. However, that 4370/4375 resistance zone capped the late day advance and weakness in the offshore session saw the SPI retest the 40s once more. Thus 4370/4375 is now an important marker going forth. 

I thought the price action in Gold, Copper and Crude Oil was actually rather bullish overnight and indicative of a capitulation time low. This may well provide some support coming into today. 

Similar to yesterday, I am looking for possible early long entries out of this 4340 support zone. The key will be bullish price action in the first 10 to 15minutes. If this level cannot hold, it opens up a deeper retrace into 4320. Thus traders playing the 40 support zone need to use tight stops. Once again, the target for any bounce is into 4370/4375 early on. Only a breakout above there would confirm a resumption of the uptrend to me.

If this materials sector is going to hold in and bounce, this is the zone that it should do it.

XJO Daily:

A number of upward sloping trendlines coming in here. 

SPI Continuous 15mins:

These are the target zones I am looking at coming into 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.

ORE Daily: Breakout and retest of neckline. One for swing traders and trend followers.

XMJ Daily: Retest of key trendline

Breakout and retest of this downward sloping trendline. This should be a significant zone of support and potential reversal area. 

BHP Daily: Strong base pattern and retest of support.

This pattern is at risk of failure soon. Any failure to bounce today and any fresh lows below 32.50 would invalidate this setup. I do believe this is a great low risk setup for those looking to join a possible new trend higher but you have to heed price action. 

FMG 60mins:Consolidating at key support zone. Potential breakout

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