Australia: S&P/ASX 200 (.AXJO) rose despite a poor GDP

Australia: S&P/ASX 200 (.AXJO) rose despite a poor GDP

Australia: S&P/ASX 200 (.AXJO) rose despite a poor GDP

Australian shares closed at a fresh six-month high on Wednesday despite fourth quarter GDP figures coming in below market expectations.

The S&P/ASX 200 Index climbed 46.3 points, or 0.8 per cent, to 6245.6 while the broader All Ordinaries advanced 45.4 points, or 0.7 per cent, to 6326.8.

The Australian economy grew by just 0.2 per cent in the fourth quarter of 2018, below expectations of a 0.3 per cent rise.

The local equity market took a more positive lead from the news, rising just after the latest GDP figures were released.

US ISM non‑manufacturing survey

The US ISM non-manufacturing survey rose above expectations in February, recording its strong monthly lift in 12 months. The index rose to 59.7 in February, up from 56.7 in January and beating market expectations of 57.3. The non-manufacturing survey covers a larger share of the economy than the manufacturing survey, which showed a drop in activity during February. The non-manufacturing lift as driven primarily by new orders and business activity. The US dollar rose against most major currencies on the back of the positive survey result but was also helped in part by stronger than expected December new home sales.

RBA cuts

Wednesday’s disappointing GDP growth data means the Reserve Bank of Australia may have to reduce its expectations for Australia’s economic growth in the next two years, according to some economists. “The challenge for the Reserve Bank will be to credibly maintain its GDP growth forecasts at 3 per cent in 2019 and 2.75 per cent in 2020,” said Westpac chief economist Bill Evans. “Consequently, the Reserve Bank is likely to see the need to further revise down its growth forecasts when it announces its revised forecasts with the May Statement on Monetary Policy. Those are likely to have an upper bound of 2.75 per cent in 2019 and 2.5 per cent in 2020.”

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 6,003.18.

The projected upper bound is: 6,371.37.

The projected lower bound is: 6,149.42.

The projected closing price is: 6,260.40.

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 32 white candles and 18 black candles for a net of 14 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 81.9909. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 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 73.02. This is where it usually tops. 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 1 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 134.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 1 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 46.300 at 6,245.600. Volume was 18% above average (neutral) and Bollinger Bands were 35% narrower than normal.

Open High Low Close Volume___
6,199.3006,246.5006,199.3006,245.600 740,784,064

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

Moving Averages: 10-period 50-period 200-period
Close: 6,179.55 5,918.68 6,012.96
Volatility: 9 12 14
Volume: 745,534,848 601,645,760 602,342,400

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 3.9% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. 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 41 periods. Our momentum oscillator is currently indicating that .AXJO is currently in an overbought condition. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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