Time To Look At Resources?

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

Overnight Market Snaphot

US Indices began the session slightly higher and received an additional boost from positive consumer confidence data. However despite this, stocks were unable to maintain the bullish tone as the major averages slipped into negative territory around midday. Stocks then extended their slide which also coincided with weakness in crude oil and the euro. 

The selling was broad-based, but financials, materials, and industrials were among the worst performers. As a result, the S&P 500 ended lower by 1.1%. From what I can see, there was no real “reason” behind the sell off other then the fact that the inability to hold above 1450 and the failure to sustain morning strength despite the positive data led to a bout of selling.

Traders in Australia should note that Iron Ore was unchanged overnight and closed at $103.70.

Yesterday I wrote,

“The 1450 level (Emini S&P500) remains key short term support with breaks of this opening up a deeper pullback into 1430/1435. The trend remains up and I continue to believe the market can grind higher into month end to retest the 1475 highs and beyond. Only a break back below 1420 would be a major waning sign to me”

Indeed, the breakdown through 1450 increased momentum to the downside and we are now testing the key 1430/1435 zone. This could be a very interesting area for traders looking for buy setups into the trend with stops below 1420.

S&P500 15mins:

Breakdown through the short term support level overnight but now into a formidable zone at 1430. Note there is a potential ABC down off the high which implies a corrective pattern and not the beginning of a new big sell off.

Emini S&P500 December Key Levels:

Support Levels: 1435/1430, 1415

Resistance Levels: 1445/1450, 1475

ASX200 and SPI Analysis

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

My SPI Range today:  

4340 to 4380. Outlier levels 4320 support.

My SPI plan today: 

SPI futures closed at 4350 overnight after hitting a low of 4345. Fair Value is currently 4points and thus the XJO is indicated around 4346.

Yesterday I wrote,

“There are certainly warning signs of a deeper potential pullback but yesterday’s lows of 4380 (SPI) need to be breached and this will open up a move into 4350 potentially.”

As ever, trading this theme during the Australian timezone is actually very difficult. The market did breach 4380 but the real sell off only really came overnight thus day traders closing out positions at the end of the Australian session were unrewarded. The market will now open right into my initial target zone. 

Today I actually think there is the possibility of a good bounce out of this 4340/4350 zone led by the resources sector. The key signal for this would bullish price action and reversal candles in the first 10 to 15minutes. Thus, traders could look for buy setups early with stops below 4340/4336. Breaks of this open up a deeper move lower into 4320 potentially. On the upside, there should be strong resistance at 4370/4375 and traders looking to join this breakdown could use this zone for short setups. 

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

XJO 15mins:

I showed this breakdown setup yesterday. The market will now be approaching a strong support zone at 4340 to 4350 as shown. 

SPI Continuous 15mins:

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

OZ Stockwatch

Eco Calendar:

No Major Economic announcements in Australia today

Analyst Rating Changes:

NUF: ‘Cut’ to ’Underperform’ at Macquarie

News:

EGP: Investment banker and director Brett Paton yesterday resigned from the board of casino operator Echo Entertainment Group, a move that some observers say makes the company more vulnerable to a takeover from rival Crown.

GNS: A consortium of investors and banks, including Australia and New Zealand Banking Group are preparing to weather hundreds of millions of dollars in losses as they wait to see if the Bell Bay pulp mill in Tasmania will find a buyer. The wait comes after Gunns, the forestry group which owned the asset, announced that it was going into administration yesterday after collapsing under approximately A$400 million of debt. 

FMG: has launched a series of surprise moves to reduce costs at its operations in Western Australia's Anderson Point. The measures include the scrapping of company barbecues, the removal of free coffee machines, locking up company stationery to stave off wastage, the abolition of external meetings unless they are free and encouraging employees to bring their own cutlery to work

LEI: Contractor Leighton Holdings (LEI) yesterday announced it would precede with the sale of its telecommunications infrastructure assets in a bid to bolster its finances. The Metronode data specialist firm and Nextgen Networks company are both on the market, while speculation is mounting that the Infoplex cloud storage and hosting group is also being sold. Ben Brownette, analyst at the Commonwealth Bank of Australia (CBA), estimated that a sale of Nextgen might attract between A$600 million and A$850 million.

LYC: Malaysian court will hear on October 4th an application for injunction regarding the co.’s operating license.

WHC: Mining magnate Nathan Tinkler may be forced to sell off his A$629 million holding in coal producer Whitehaven Coal (WHC), after junior miner Blackwood Corp (BWD) asked the New South Wales Supreme Court to appoint a liquidator to Mr Tinkler's Mulsanne Resources. Mr Tinkler earlier this year pledged to buy a 33.85 percent stake in Blackwood for A$28.4 million, but failed to produce the funds despite launching a A$5.3 billion bid to privatise Whitehaven.

Technical:

-Price/Vol scan and Bullish price action: AZH, BPT, CBA

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

-Upside Breakouts plays: AWC, AZH, AUT, CBA, MBN, SFR

-Downside Breakdown plays: AAX, AGO, LYC, MND, 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 on twitter @FP_markets for live commentary throughout the day.

WPL Daily: Breakdown through support and possible topping pattern.

On Friday, the stock opened strongly given the positive bounce in Oil but made its high in the first 15minutes and trended lower for the rest of the day. This is bearish price action. A breakdown through 34.00 could trigger this Head and Shoulders pattern. 

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 confirmed breakout

Breakout from a strong base pattern and retest of support. This is a great low risk setup for those looking to join a possible new trend higher. A risk would be on a close back below 33.00

RIO 60mins: Pullback into potential support zone. 

AUDUSD
Australia’s dollar fell against its US peer yesterday due to a selloff in US equities. Both the Aussie and the Kiwi were holding in well during the European session but couldn’t hold onto gains given the risk off mode.
From a technical perspective, as long as the Australian Dollar can hold above the 1.0380/1.04 support zone in coming days, 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 on Friday. The Kiwi also retested and held the key support zone at 0.8180/0.820.

AUDUSD 60mins:
These are the boundaries I continue to look at. The support zone continues to hold but is looking increasingly vulnerable to a breakdown. 

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