Technicals | Jul 31 2012
By Michael Gable
The market managed to string together a 3 day rally, helped by comments by ECB president Mario Draghi that they’ll do “whatever it takes” to defend the euro. Most people left out the last bit of his quote which ended in “within our mandate”. They’ve backed themselves into a corner here so it will be interesting to find out this week if there is any detail worth getting excited about. It was a relief to see the 10 year bond yields in Spain fall back under that 7% danger level, but they are still at elevated levels. Yesterday morning saw Aussie bonds sell-off (indicating a move out of safer assets), but by midday they rallied strongly off their lows. This indicates some scepticism at what will come out of Europe this week.
And who can blame them? The EU is getting a reputation for being all talk and no action. So while the market moves in the last couple of weeks have surprised on the upside, I am still cautious and maintain an eventual target of 3600 on the index before I want to get aggressively long again. But I have to be open minded, so if we don’t see a savage sell-off, then I need more evidence of substantial buying in the market. We need to see further downside on Spanish and Italian bond yields, and we need to see stronger volumes in the cyclical stocks.
Last week I noted that the ASX200 sold off from its 50% retracement level. The moves so far this week have seen it edge back above that level so we really do need to see a decent sell-off this week, otherwise the XJO could have another 100 points in it. What is interesting however, is the performance of the All Ordinaries. Yesterday saw the All Ords come close to its own 50% retracement level. On a closing basis, today also marks the 90 days since the previous top in May for the All Ords. The Gann Timing enthusiasts out there will therefore be calling for a top in the market today. It will be interesting to see how that pans out. At the end of the day, while the market has held in longer than anticipated, the move up is very corrective compared to the move down, so from a charting perspective, there is still further risk to the downside, with the 3600 area remaining a target.
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Visit Michael Gable's website at www.michaelgable.com.au/.
After leaving Macquarie Bank's Securities Group in 2008 after many years of service, Michael has gained a highly regarded reputation in the financial services industry. As a Private Client Adviser with Novus Capital, Michael has become a popular live commentator and analyst for Sky News Business Channel’s “Your Money, Your Call” program. He is also the author of the weekly stock market report “The Dynamic Investor”.
Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management.
Michael deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
Disclaimer
Michael Gable is an Authorised Representative (Rep. No. 376892) of Novus Capital Limited AFSL 238168 ACN 006 711 995. Michael Gable and Novus Capital Limited, their associates and respective Directors and staff each declare that they, from time to time, may hold interests in securities and/or earn brokerage, fees, interest, or other benefits from products and services mentioned in this website. This website may contain unsolicited general information, without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you must consider the appropriateness of the information in this website or the Product Disclosure Statement (PDS) or Financial Services Guide (FSG), having regard to your objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance. Michael Gable and Novus Capital Limited believes that any information or advice (including any securities recommendation) contained in this website is accurate when issued but does not warrant its accuracy or reliability. Michael Gable and Novus Capital Limited are not obliged to update you if the information or its advice changes. Michael Gable and Novus Capital Limited and each of their respective officers, agents and employees exclude to the full extent permitted by law, all liability of any kind, in negligence, contract, under fiduciary duties or otherwise, for any loss or damage, whether direct, indirect, consequential or otherwise, whether foreseeable or not, to the extent arising from or in connection with this website.
