The Overnight Report: Eight Days In A Row

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            [5] => ((VCX))
            [6] => ((LLC))
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This story features ASX LIMITED, and other companies.
For more info SHARE ANALYSIS: ASX
The company is included in ASX50, ASX100, ASX200, ASX300 and ALL-ORDS

By Chris Weston, Head of Research, Pepperstone

Good morning.

It’s been another strong day for the equity bulls, with a solid intraday trend pushing the S&P500 and NAS100 higher for an 8th consecutive day. Momentum is a powerful force when it cranks up and with the S&P500 only -1.1% away from the all-time highs (printed on 16 July), you can almost feel the buyers pulling it higher for that big re-test.

There was a moment where the S&P500 futures found supply into the 1 August pivot high at 5600, but it didn’t take much for the buyers to regain composure and push all the major US indices to close at or close to session highs. Shorts were covered hard yet again, with high short-interest stocks outperforming, but there was also real organic buying with systematic momentum players chasing the move higher.

Participation was solid too, with 82% of S&P500 companies closing in the green, with tech, consumer services and discretionary leading the pack. Even the energy sector closed higher despite crude -2.9%, so there was broad love for equity.

Technically, despite 8 days of gains, the various indices are not yet overbought, but to the discretionary market players, these are levels which are now hard to chase. It is certainly rare to see such form in the S&P500, and since 2005 we’ve seen just six occurrences where the S&P500 has closed higher for 8 straight days, and in each occurrence, the S&P500 closed lower the following day.

Six is not a significant sample size, but it is worth highlighting that in most of those occurrences, the S&P500 was higher 5 days later so the form guide does bode well for those positioned for new highs.

We’ve not seen much movement in US Treasuries or the interest rates markets. It’s also been a lively session for gold traders, with some choppy price action and several big intraday reversals to contend with. Those positioned short would have been feeling happy with the move in early US trade into US$2485/oz, but the goodwill was short-lived as the buyers took it back above US$2500. No real news to spark the reversal, and I see little influence from the US bond market or USD, so these are flows very much focused on gold in isolation.

Looking ahead Asia should feed off the rally we’ve seen in the US, where we see the ASX200 opening +0.5%, HK50 +1% and Nikkei 225 +1.2%. The ASX200 has the impact from earnings which come in thick and fast, but with our call sitting at 8024, the index is not far off the all-time high printed on 1 Aug of 8148. Even iron ore futures are providing tailwinds, with Dalian iron ore futures 1.1% higher from the ASX200 close yesterday.

By way of event risk, we see the China Prime Rate decision, where expectations for a change to either the 1- or 5-year rate are low. We also see RBA minutes, and the Riksbank meeting (Sweden), EU and Canadian CPI. We should see the Riksbank rates cut by -25bp, but this is fully priced by rates markets.

On the calendar today:

(AU) Aug RBA Minutes

(EZ) July CPI

(NZ) July Trade Balance

(ANN) earnings report

(ANZ) quarterly trading update

(APE) earnings report

(ARB) earnings report

(BBN) earnings report

(CPU) ex-div 42c

(DRR) earnings report

(DXS) earnings report

(HLI) earnings report

(HUB) earnings report

(INA) earnings report

(IRI) earnings report

(JDO) earnings report

(MAD) earnings report

(MCY) earnings report

(MFG) ex-div 35.70c (50%)

(MND) earnings report

(PRN) earnings report

(RWC) earnings report

(SGM) earnings report

(SVR) earnings report

(TAH) earnings report

(VCX) earnings report

Corporate news in Australia:

-ASIC reportedly did not pursue insider trading allegations at the ASX ((ASX))

-Booktopia ((BKG)) has been sold to digiDirect

-James Hardie ((JHX)) is reportedly in the early stages of a potential U.S. acquisition

-Autosports Group ((ASG)) is buying Melbourne’s Stillwell Motor Group, which sells BMW and Ducati, for $55m

-Virgin Australia’s planned float has been delayed by about a year due to recent asset discussions with Regional Express Holdings ((REX))

-Mall landlord Vicinity Centres ((VCX)) has settled the $420m purchase of a half-stake in Perth’s Joondalup Shopping Centre, acquiring it from the Future Fund. Lendlease ((LLC)) owns the other 50%

The Australian share market over the past thirty days

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here. (Subscribers can access prices on the website.)

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