Australia: S&P/ASX 200 (.AXJO) investors focusing on the upcoming election

Australia: S&P/ASX 200 (.AXJO) investors focusing on the upcoming election

Australia: S&P/ASX 200 (.AXJO) investors focusing on the upcoming election

There appears to be no rational reason why the positive sentiment around the Australian stock market evaporated at the end of this week. Investors just got a bout of the yips.

There was no particularly negative economic news, no big corporate disappointments – just a sense that the massive bull run at the start of 2019 needs to take a breath and allow investors to take a look at the horizon.

Investors didn’t start selling, they just stopped buying.

So what is distracting Australian investors? It is a fair bet that after a strong start to the week they are now focusing on the upcoming election thanks to the certainty that the election will be called over the next couple of days.

Of course everyone has known for months that we would head to the polls in May. But when elections actually get called (or we know we are only days from the announcement), it feels imminent. It causes uncertainty – which is what markets hate most of all.

Until Thursday investors had been diverted by Tuesday’s federal budget and what it meant for sectors of the economy. It was broadly well received, in particular because it provided some fiscal stimulus for consumers along with a few handouts which could help to kickstart economic growth – even though the motivation for the government’s largesse was actually to improve the coalition’s electoral popularity.

For those investors that held their nerve in the months leading up to Christmas, the first three months of the year would have come as a welcome relief.

Those that buckled may have cemented hefty losses.

And those that dived into the market when the prices were under pressure at the end of the year, 2019 has been a bonanza.

But the next six weeks will be testing for our equity market. It is a long time until the next reporting season will herald how well profits are tracking.

In the meantime, the election will be front of mind as campaigning will move into full swing next week and the prospect of cuts in negative gearing and capital gains tax will weigh heavily on those companies involved in the building and financing of housing – including the banks.

Overall, the bias in prices is: Upwards.

The projected upper bound is: 6,287.17.

The projected lower bound is: 6,088.05.

The projected closing price is: 6,187.61.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 30 white candles and 20 black candles for a net of 10 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 59.1258. This is not an overbought or oversold reading. The last signal was a sell 0 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 51.40. 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 20 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 14. This is not a topping or bottoming area. The last signal was a sell 0 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 2 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -51.500 at 6,181.300. Volume was 23% below average (neutral) and Bollinger Bands were 49% narrower than normal.

Open High Low Close Volume___
6,232.8006,232.8006,169.8006,181.300 494,452,448

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 6,190.81 6,120.97 6,026.42
Volatility: 12 10 14
Volume: 633,138,688 682,253,952 608,576,960

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 2.6% above its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 bearish on .AXJO and have had this outlook for the last 11 periods.

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