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Australia: S&P/ASX 200 (.AXJO) local investors largely shrugged off a Fed-driven sell-off

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Australia: S&P/ASX 200 (.AXJO) local investors largely shrugged off a Fed-driven sell-off

Australian shares closed slightly lower on Wednesday, as local investors largely shrugged off a Fed-driven sell-off on Wall Street on Tuesday.

The S&P/ASX 200 Index slid 17.5 points, or 0.3 per cent, to 6640.5 while the broader All Ordinaries lost 18.4 points, or 0.3 per cent, to end the session at 6716.1.

St Louis Federal Reserve president James Bullard said on Tuesday a 0.5 percentage point cut in July would be overdone, pushing shares on Wall Street firmly lower. The reaction on the local market was much more subdued as investors patiently awaited the G20 Summit on Friday.

“We see rising geopolitical tensions surpassing Fed policy as the lead driver of global financial markets near term,” said BlackRock’s head of active investments for Asia-Pacific, Belinda Boa.

“The flop in US-China trade talks and posturing on key technologies of the future evidenced the deeper-than-trade gap that separates the world’s two largest economies.

“Given the deterioration of the external environment, we have reduced risk across the portfolios, positioning them more defensively.”

RATE CUTS

Capital Economics believe a 0.5 per cent cash rate is the floor for policy rates and that the Reserve Bank of Australia could consider quantitative easing after that. Senior Australia & New Zealand economist Marcel Thieliant believes the RBA will cut rates to 1 per cent at its next meeting, cutting to 0.5 per cent by early 2020. “We still think that the RBA remains too optimistic about the outlook for GDP growth,” he said. “While the bank expects GDP to expand by 2 per cent this year, we think the actual increase will be only 1.5 per cent.

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 6,415.47.

The projected upper bound is: 6,769.18.

The projected lower bound is: 6,529.49.

The projected closing price is: 6,649.34.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 5 white candles and 5 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 69.1234. This is not an overbought or oversold reading. The last signal was a sell 1 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 65.39. 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 3 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 72. This is not a topping or bottoming area. The last signal was a sell 2 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 10 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -17.500 at 6,640.500. Volume was 15% above average (neutral) and Bollinger Bands were 87% wider than normal.

Open High Low Close Volume___
6,658.0006,658.0006,637.4006,640.500 745,995,072

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period     50-period     200-period
Close: 6,614.75 6,415.28 6,064.39
Volatility: 9 12 14
Volume: 751,806,208 630,389,568 625,218,048

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 9.5% above its 200-period moving average and is in an upward trend. Volatility is high 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 11 periods.

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