Australia: S&P/ASX 200 (.AXJO) brutal change in sentiment, triggered by an outsized wobble on US and European markets

Australia: S&P/ASX 200 (.AXJO) brutal change in sentiment, triggered by an outsized wobble on US and European markets

Australia: S&P/ASX 200 (.AXJO) brutal change in sentiment, triggered by an outsized wobble on US and European markets

The 3 per cent fall on the ASX200 over the week — the sharpest retreat in almost a year — was a fairly abrupt and brutal change in sentiment, triggered by an outsized wobble on US and European markets.

That in turn was triggered by some worrying US manufacturing numbers (that Europe’s factories are frail is a well-established fact) and the World Trade Organisation saying it was fine for the US to whack tariffs on Europe’s wine, cheese, olives and aircraft.

As the dust settled, it was clear the Asian and European markets were hardest hit; the benchmark US S&P500 index fell only 0.3 per cent, while the tech-centric Nasdaq, against the odds, put on 0.5 per cent.

A shout out to the New Zealand stock exchange for clambering over the advantage line last week, but the brokers there may well have been glued to the Rugby World Cup and may have missed the other carnage going on.

This week

The scheduled resumption of US-China trade talks (Thursday) is really the one thing that matters, globally speaking.

An announcement of a delay in the October 15 tariff escalation would be a positive start, even if no other agreement was reached.

In fact, anything better than a complete breakdown in talks would be a win.

Locally it is fairly quiet.

Readings of business (Tuesday) and consumer (Wednesday) sentiment are important. Neither has been particularly robust of late.

On the positive front, new home loans should show sentiment in that sector at least, is picking up.

Australia

DateEventComment/forecast
Monday7/10/2019Public holidayNSW, ACT, Queensland & SA observe Labour Day or Queen’s Birthday— take your pick (Markets open)
Construction surveySep: AiG PCI, activity still contracting sharply, recession like conditions
Tuesday8/10/2019Business surveySep: NAB survey. Conditions and confidence below average
Job adsSep: ANZ series. A leading indicator continues to show weakness
Wednesday9/10/2019Consumer confidenceOct: Pessimists back in charge in September, housing pick up may improve sentiment
Dwelling commencementQ2: Sharp collapse in building approvals like to see commencement down 7pc QoQ & 25pc YoY
Thursday10/10/2019Home loansAug: Loan value likely to be up a solid 5pc MoM, but sill down around 12pc YoY

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 6,686.13.

The projected lower bound is: 6,337.02.

The projected closing price is: 6,511.57.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

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 9.2741. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 10 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 38.73. 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 64 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 -238.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 4 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed up 24.100 at 6,517.100. Volume was 29% below average (neutral) and Bollinger Bands were 16% narrower than normal.

Open     High      Low     Close     Volume___
6,493.0006,532.7006,489.9006,517.100 473,322,720
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 6,668.36 6,616.33 6,334.59
Volatility: 17 17 13
Volume: 597,420,608 689,668,544 637,099,200

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 2.9% above its 200-period moving average and is in an upward 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 moderate flows of volume into .AXJO (mildly bullish). Our trend forecasting oscillators are currently bullish on .AXJO and have had this outlook for the last 20 periods.

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