XMJ Bullish Follow Through?

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

Overnight Market Snaphot

 

US Equities got off to a strong start, buoyed by a strong rally in Asian markets on news that the People Bank of China has injected a record amount of liquidity into the banking system. Stocks brushed off a string of negative economic data to rally through the day with indices closing on their highs. This is strong underlying price action. Indeed, the estimate of second quarter GDP indicated growth of 1.3% which was well below the prior reading of 1.7%. Elsewhere, durable goods orders also showed notable weakness as new orders declined by 13.2% during August.  The S&P 500 settled higher by 1.0% whilst the Nasdaq 100 outperformed closing +1.44%.

Yesterday I talked about the strong bullish reversal in commodities such as Gold and Copper, and this proved to be a lead indicator for our equity market bounce yesterday. Overnight, Gold went from strength to strength with the December futures surging to make a high of 1782. Traders in Australia should note that Iron Ore was unchanged overnight and closed at $104.20.

Yesterday I wrote,

“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”

There was a bullish reversal candle right out of the support zone and I believe this is now confirmation of a continued move higher with risk on a break below last night’s lows. The targets are up to the previous highs at 1475 and beyond to 1515.

S&P500 Daily:

Emini S&P500 December Key Levels:

Support Levels: 1435/1430

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: 

4375 to 4420. Outlier level 4365/70 support and 4430 resistance.

My SPI plan today:

SPI futures closed at 4388 overnight after hitting a high of 4396. Fair Value is currently 4points and thus the XJO is indicated around 4392.

Well yesterday we finally got the strong bounce out of the 4340/50 support zone which was led by the resources. I had been anticipating this setup based on the XMJ chart as well as the strong support zones in BHP and RIO. As a trader you have to be prepared and wait for the price action to confirm the setup. I believe the bullish turnaround in the resource sector has some way to run still and yesterdays lows could be used as interesting stops points for long trades. I continue to focus on “quality” stocks that have formed strong base patterns that offer good low risk/high reward entries into the uptrend. These include AZH, AMX, BHP, MML, NHC, NCM, SFR, and STO amongst others.

Yesterday I said, “If this materials sector is going to hold in and bounce, this is the day and zone that it should do it.” I believe we saw this yesterday: http://fpmarkets.blogspot.com.au/2012/09/time-to-look-at-resources.html

Today there will be strong early resistance at 4395 to 4405 as per the SPI 15min chart below. This may provide some initial resistance. Traders who think this is a “dead cat bounce” should use this zone for potential low risk short setups when price action confirms. However, given the strong bullish reversal yesterday, I am looking for potential low risk buy setups. There should be good initial support on any weakness in the low 80s. If there is no weakness, look for breakout trades ABOVE 4405 targeting the previous highs up at 4420 and beyond. Note we are coming into month and quarter end, and there may well be some strong window dressing coming into this.

XJO Daily:

Bullish reversal candle right out of the upward sloping trendlines. 

SPI 15mins:

This is the early resistance zone today. Breaks of 4405 open up a retest of the previous highs. 

OZ Stockwatch

Eco Calendar:

11.30am AUS    Private Sector Credit (MoM and YoY)

Corp Calendar:

MTU: Ex-Div

SGM: Ex-Div

Analyst Rating Changes:

ORE:  Cut to hold from speculative buy at Byron Capital Markets; PT A$2.40

News:

BTU: FY loss widens to A$21.52m from A$13.48m loss yr ago

CTX: The company confirms the Kurnell refinery closure in 2014

EGP: Larry Mullin has been ousted as the chief executive of Echo Entertainment Group, with the casino operator attempting to repair its rapport with the New South Wales government. The move shocked some of Echo's institutional investors.

ORG: The company and Conoco are starting a process to sell APLNG project stakes. (AFR)

SDL: Trading Halt

Technical:

-Price/Vol scan and Bullish price action: AZH, BHP, BUX, CBA, MML, NCM, RIO, and SFR

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

-Downside Breakdown plays: AAX,

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.

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

NCM Daily:
Retest of strong support at 27.50 to 28.00. There was a bullish reversal yesterday and this could be the beginning of a retest of the recent highs at 30.00 and beyond. 

CBA 60mins: Breakout trade

CBA broke out strongly yesterday above the 55.50 zone. This opens up a potential retest of the previous highs. 

AUDUSD 60mins:
Price has broken out above this downward trendline and recaptured the 1.04 zone. This is a sign of genuine strength and a short covering rally could fuel a move back into 1.0520 and beyond. 

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