Australia: S&P/ASX 200 (.AXJO) and Wall St rebound from coronavirus fears but pares gains after RBA cuts rates

Australia: S&P/ASX 200 (.AXJO) and Wall St rebound from coronavirus fears but pares gains after RBA cuts rates

Australia: S&P/ASX 200 (.AXJO) and Wall St rebound from coronavirus fears but pares gains after RBA cuts rates

The ASX 200 index finished the session 0.7 per cent higher at 6,435 points. The broader All Ordinaries index rose 50 points to 6,511.

The Australian share market had an early boost from investors buying the dip and betting that the Reserve Bank would slash interest rates to record lows.

However, after the RBA delivered the 25 basis point cut, the major bank stocks tumbled as they passed on the rate cut in full, which is likely to hit their profit margins.

Commonwealth Bank posted the biggest decline among the big four banks (-1.7pc), followed by ANZ, (-1.4pc), NAB (-1.4pc) and Westpac (-1.1pc).

Those falls caused the broader market to retreat from its highs.

Dow surges 5 per cent on stimulus hopes

The local market has some way to go before recouping all its losses, given that it lost more than $240 billion after plummeting for seven trading days in a row.

But that is small change when considering more than $US5 trillion ($7 trillion) was wiped off US, European, Asian and other foreign markets last week.

Most Asia-Pacific markets are also seeing a rebound in today’s session, including New Zealand (+2.2pc) and South Korea (+1.2pc), while Japan’s market fell back into the red (-0.7pc).

In addition, Wall Street rebounded overnight on hopes that the US Federal Reserve will cut rates this month, possibly by as much as 50 basis points.

The Dow Jones indexed jumped 1,294 points, or 5.1 per cent, to 26,703 — its biggest one-day gain since March 2009.

The benchmark S&P 500 and tech-heavy Nasdaq also experienced sharp rises, up 4.6 and 4.5 per cent respectively — their best trading sessions since 2018.

European markets were mixed overnight, with gains for London’s FTSE (+1.1pc) and Paris’ CAC (+0.5pc), but falls for Germany’s DAX (-0.3pc).

Meanwhile, Brent crude made a comeback overnight, after its price was battered in the past few weeks.

Overnight, it lifted by 4.9 per cent to $US52.08 per barrel on hopes that OPEC will cut output to bolster the price of oil.

The spot price of gold lifted by 2 per cent to $US1,597 an ounce — after earlier in the week suffering its biggest daily fall since 2014.

Technical Indicators

Overall, the bias in prices is: Downwards.

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

By the way, prices are vulnerable to a correction towards 6,823.36.

The projected upper bound is: 6,615.04.

The projected lower bound is: 6,239.73.

The projected closing price is: 6,427.39.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

A long upper shadow occurred. This is typically a bearish signal (particularly when it occurs near a high price level, at resistance level, or when the security is overbought).

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 16.9933. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 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 23.23. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 27 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 -119.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 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 sell 6 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed up 44.200 at 6,435.700. Volume was 67% above average (neutral) and Bollinger Bands were 232% wider than normal.

Open     High      Low     Close     Volume___
6,391.5006,524.3006,391.5006,435.7001,046,948,672
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 6,792.54 6,921.90 6,714.23
Volatility: 24 18 15
Volume: 1,069,320,576 649,410,048 641,364,352

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 4.1% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .AXJO and have had this outlook for the last 4 periods. Our momentum oscillator is currently indicating that .AXJO is currently in an oversold condition.

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