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

Whats Your Plan Tonight?

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

So the market has now given back most of the euphoric gains post the announcement of QE3. On first take that would appear to be rather bearish and a classic "buy the rumour, sell the news" event. 

However, as I have continued to highlight in my reports, the S&P500 is in a strong uptrend having broken above the April 2012 highs. Thus as long as the market holds this key 1420 key marker, I believe traders could continue to focus on retracements into this uptrend. I have no idea if this is the "top". All I can say is markets take time to transition from strong uptrends into new downtrends. We will soon learn if the character of this market has genuinely changed if we cant hold in here. 

So coming into tonight, I see a key zone of support in the 1430 to 1435 area in the Emini S&P500. I think the ideal setup would be a bit more panic into this area come the open with a swift bullish reversal. 

The major warning sign to me is the Eurostoxx Daily chart which could be a potential ending wedge type setup. The key support area there is 2530 with 2500 a line in the sand (similar to my 1420 S&P500 level)

So here are the setups I am looking at tonight:

Eurostoxx Dec 60mins:

Price couldn't breakout above that downward trendline overnight. The pattern still appears to be a triangle type setup and price is now testing the low end of the range at 2530. Short term traders could look for buy setups into the low end of the range if we start seeing confirmation. 

Eurostoxx Cash Daily:

Potential ending wedge type pattern. However, 2500 remains key short term support. 

Emini S&P500 15mins:

A potential ABC type pattern into key support. Look for bullish hammers and confirmation out of this zone. 

S&P500 Daily:

Trendline support coming into tonight

And here are the FX setups on my radar: http://fpmarkets.blogspot.com.au/2012/09/fx-report.html

Thanks

Austin

FX Report

FX Report

The Australian dollar fell against its US peer overnight due to a sell off across the board in risk assets. Both the Aussie and the Kiwi were holding in well during the European session but couldn’t hold onto gains, and were hit in line with selling in the US equities. It would appear there was some nervousness after a Senior spokesman for Chancellor Angela Merkel said Spain’s Prime Minister must decide whether the country needs a full rescue (Bloomberg).

The Australian Dollar has hit a low of 1.035 in Asian trading this morning and has thus broken through my key 1.038 to 1.040 support zone. The move doesnt look impulsive to me to the downside but you just have to heed the price points. At this juncture, I really don’t have a clear setup and it is important for analysts and traders to step aside at such junctures. If price can regain the 1.0430 level as shown in the chart below, this would be a sign of strength. Traders who have shorted the breakdown could consider stops above that zone. 

The strongest pair against the USD remains the Kiwi. NZDUSD continues to hold the 0.8180 support zone and traders could continue to look for buy setups out of this zone with tight stops.

AUDUSD 60mins:
The Aussie broke down through the recent support zone I have been looking at. The short term trend remains down and only a move back above 1.043 would indicate a more meaningful turn. Note that the 61.8 Fibonacci retracement does comes in around 1.0340 as a potential long scalping level.

NZDUSD Daily:
A breakout above the downward trendline and previous swing high. Furthermore, all the moving averages are sloping upward thus traders should look for continued retracements back into this strong trend. 

NZDUSD 60mins:
The Kiwi remains one of the strongest pairs globally against the USD. Price is retesting the previous breakout zone and this offers a potential low risk entry into the trend. The recent pullback from the high looks corrective to me which implies that this is not the beginning of a new strong trend down. 

EURUSD 60mins:
The EURO is still holding the 1.29 level but is looking increasingly vulnerable to a breakdown. Traders could look to sell on breaks of this level with tight stops targeting 1.28. 

AUDJPY 60mins:
AUDJPY has now entered into a possible support area with bullish divergences appearing. This implies that the downward trend is tiring. Traders should wait for confirmation for a potential turn. A failure to bounce out of here opens up a retest of the lows at 80.

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.

Consolidation and Looking For Breakouts

US Markets

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

US Indices began the session lower due to weakness in offshore trading. However, the major averages made their lows during the opening minutes and set off on a day-long climb towards the unchanged line. This is healthy price action and clearly it appears traders were happy to buy the dip in the short term. My key support zone at 1450 in the S&P500 held in. 

As I said yesterday, I believe the market remains in a strong uptrend and a period of consolidation is more than likely after a strong run up. I see a number of short term consolidation patterns forming and this implies potential breakouts higher into month end.

To reiterate, there are no topping or distribution patterns currently in place in US indices. It takes time for markets to transition and there will be plenty of warning signs ahead of time. The major Indices have all broken above their respective April 2012 highs with momentum and this is a sign of genuine strength. Thus, I continue to believe that following this uptrend and looking for low risk long setups into the trend is the play. Only a break back below 1420 would be a major waning sign to me. Traders love to try and pick the tops but in this environment with a strong trend and central banking easing, it is a tough one to fight.  

Tonight on the economic calendar we have the S&P/Case-Shiller Home Price data, Consumer Confidence and a speech from the Treasury’s Tim Geithner.

S&P500 Daily:

The Market remains in a strong uptrend having broken out above the recent April highs. Only a close back below the low of these strong candles would imply a trend change and warning flags.

Emini S&P500 60mins:

Yesterday I said traders could look to buy pullbacks into 1450/1440. This worked well and we are seeing follow through in Asia today. Breakouts are needed above this downtrend line to confirm further strength. 

Emini S&P500 Dec Key Levels:

Support Levels: 1445, 1430

Resistance Levels: 1465/1470, 1515

Europe

Europe's main stock markets were lower on Monday as investors reacted to news of sliding business confidence in eurozone economic engine Germany and continued nervousness surrounding a Spanish bailout.

London's FTSE 100 ended the day off 0.24 percent at 5,838.84 points, while in Frankfurt the Dax gave up 0.54%  to finish at 7,413.16 points. In Paris the CAC fell by 0.94% to 3,497.22 points whilst Madrid's IBEX 35 lost 1.12%

From a technical standpoint, the Eurostoxx does appear overextended on the Daily chart and is struggling at the key 2600 level. I think a period of consolidation may be needed in the bigger picture before a strong breakout can occur above 2600/2625. In the short term, price is consolidating and not selling off which implies potential gains in coming days. 

On the economic calendar tonight we have a German Consumer Confidence Survey and a Draghi-Merkel meeting.

Eurostoxx Daily:

The market is retesting its previous highs. Note that this upward sloping trendline was hit and held yesterday. 

Eurostoxx 15mins:

These are the short term levels I am looking at. The market continues to hold the low end of the range and traders could look for breakouts above this downward trendline into the 2600/2625 zone. 

FX Majors

Australia’s dollar fell against its US peer yesterday as speculation slowing economic growth in China damped demand for higher-yielding assets. Indeed, China’s Economic Information Daily said downward pressure on the Asian nation’s economy was increasing. However, overnight the battler retested the key 1.038 support area and bounced. 

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 overnight which is a positive development.  

AUDUSD 60mins:

These are the key short term levels I am looking at. Traders could look to buy the low end of this range and this support zone at 1.040 with tight stops. A breakdown through this level could turn the trend to down. 

NZDUSD Daily:

Breakout above the downward trendline and a new swing high was made recently. This implies a trend change to up with higher highs and higher lows

NZDUSD 60mins:

Price continues to hold the low end of the range. Traders could use this zone for long setups. Only a break below 0.8180 would invalidate this setup.  

EURUSD 60mins:

1.29 is a key short term support level. Traders could look for buy setups into the low end of this range to join the strong Daily uptrend. A breakout above this downward trendline would act as confirmation. 

Commodities

I think a period of consolidation will be needed before the next major move higher in Gold.

Gold 30mins:

Attempted breakout that was sold into with genuine strength. A breakdown through this 1760/65 zone would open up increased selling into 1740. Traders could use bounces back into 1770s for potential aggressive short entries with tight stops. 

Gold Daily:

Bearish Daily reversal candle right out of my resistance zone.