Technicals | Nov 20 2012
By Michael Gable
That downwards bias I spoke about last week surely caught a few people off guard with the market suffering its biggest weekly fall since May. The fiscal cliff is being used as the scapegoat but normally when a market gets as overbought as this, investors look for any excuse to exit. It is normal for nervousness to creep in, and if its not the fiscal cliff, it could be the recession in Europe or the fears of slowing GDP growth here in Australia.
While the market will be up today, we have to be very careful about chasing this rally. The downtrend has now been set in my opinion. Any move up here is a counter-trend relief rally. While it can seem sharp and impulsive, the market can turn back just as easily. Whether it lasts days or weeks is hard to tell, but the market will once again resume its downward trend and we will see lower levels. Based on the evidence so far, I think there is a high probability that we have seen the highs for this year. That is, no Christmas rally to 5000 as many were suggesting a few weeks ago.
One of the sectors not doing too well at the moment is the banks. Most recently we are seeing the banks tightening lending standards due to concerns about the economy and the health of the property market. Now that 3 of the big 4 have gone ex-dividend, I would continue to expect to see the banks under pressure for a little time yet. With the market under pressure and dividends another 6 months away now, why would anyone be jumping back into the banks just now? Cheaper levels can be had for those that are patient.
Last week I spoke of the market heading down, not up, and support levels at 4420 and 4350. The 4420 level didn’t hold, but we can clearly see the 4350 area offering good support. We have most likely seen the end of the first leg down. A rally up may find resistance at that 4420 level. Ultimately we are now about to see a counter-trend move up, before commencing the second leg down. I will have to wait for the commencement of the next leg down to figure out the support levels but they will most likely be down towards 4150 – 4200.
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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
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