Australia: S&P/ASX 200 (.AXJO) soars past 7,000 points; Wall St wavers over US-China trade deal

Australia: S&P/ASX 200 (.AXJO) soars past 7,000 points; Wall St wavers over US-China trade deal

Australia: S&P/ASX 200 (.AXJO) soars past 7,000 points; Wall St wavers over US-China trade deal

That was despite alukewarm lead from Wall Street after the United States and China signed their long-awaited “phase one” trade agreement.

The ASX 200 closed 0.7 per cent higher at 7,041 points, while the broader All Ordinaries index gained 0.6 per cent to 7,158.

The gains build on a strong start to 2020 — the ASX has been the best performing developed economy market since the year began, having surged 5.3 per cent over the past fortnight.

The Reserve Bank has aggressively cut interest rates to historic lows over the past few months, in an attempt to stimulate Australia’s slowing economy.

As a consequence, Australians have been earning lower interest on their savings — not much better than zero per cent.

So in the hope of earning a “decent” return elsewhere, they have increasingly been investing in the share market — driving its value to “overstretched” proportions, according to Mr Weston, with the ASX’s price-to-earnings ratio at a very expensive 18.2x.

He also explained the market has also been driven higher by a flood of “liquidity”, since lower interest rates have made it a lot cheaper for investors to borrow money.

Fading levels of excitement

Wall Street briefly hit record highs after the preliminary trade deal was signed by US President Donald Trump and China’s Vice-Premier Liu He on Wednesday morning (local time).

But the major indices pulled back after that as investors got over their initial excitement.

The S&P 500 and Nasdaq briefly fell into the red in afternoon trade, but managed to recover by the closing bell — posting a 0.2 and 0.1 per cent gain respectively.

The Dow Jones index closed 0.3 per cent higher at 29,031 points.

The centrepiece of this preliminary trade deal is a pledge by China to buy an extra $US200 billion worth of US farm products, and other goods and services, over two years.

Although the US agreed to roll back some of its punitive tariffs, the vast majority (on $US250 billion worth of Chinese goods) will remain, as Mr Trump wants to use that as leverage when negotiating a more substantial “phase two” deal with Beijing, later this year.

US markets were also dragged down by financial heavyweights Bank of America (-1.8pc) and Goldman Sachs (-0.1pc) after they announced disappointing quarterly results.

Bank of America Corp reported a better-than-expected quarterly profit, but warned of weak net interest income in the first half of this year.

Goldman Sachs reported a bigger-than-expected slide in profit as it set aside another $US1.1 billion money to cover legal costs related to the 1MDB Malaysian corruption scandal.

Technical Indicators

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 6,766.98.

The projected upper bound is: 7,205.78.

The projected lower bound is: 6,892.02.

The projected closing price is: 7,048.90.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 99.5358. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 8 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 69.65. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 135 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 145.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed up 47.000 at 7,041.800. Volume was 7% below average (neutral) and Bollinger Bands were 44% wider than normal.

Open     High      Low     Close     Volume___
6,994.8007,041.8006,994.8007,041.800 548,157,888
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 6,881.89 6,782.65 6,607.14
Volatility: 9 15 14
Volume: 490,051,168 557,550,720 611,235,136

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

S&P/ASX 200 is currently 6.6% above its 200-period moving average and is in an upward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .AXJO and have had this outlook for the last 5 periods.

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