Australia 200 - Continues To Retreat Under 5500

by: Dean Popplewell

By Stuart McPhee

Australia 200 for Thursday, July 10, 2014

The question of whether or not the Australia 200 Index be able to maintain its break through the key resistance level at 5500 was answered a couple of days ago when almost on cue, it returned to its more familiar surroundings. There has not been a doubt on whether it will return to the 5500 level or not as it has moved back and forth between 5400 and 5500 for the last few months. It has reversed over the last few days bringing it back down below the 5500 level. In the early stages of last week it fell sharply back towards 5400 again and relied heavily on support around that level. Several weeks ago the Australian 200 Index fell and broke back down through the key 5500 level towards a four week low around 5400 before consolidating and resting on support there. These two levels have firmly established themselves as significant and any substantial break to either side will most likely be a significant move and be closely monitored. It is quite likely many are sitting on the sidelines waiting for the break before committing as they continue to watch the index move between these two levels.

Back at the end of May, it moved back and forth between the two key levels of 5500 and 5550 before the recent fall. Over the last couple of months the Australia 200 Index has formed an amazing attraction to the key 5500 level as it spent a considerable amount of time trading around it. A couple of weeks ago, the index fell away heavily back down to support around 5400 before returning to the key 5500 level just as quickly, as if gravity had pulled it back. Throughout the last couple of months it has been placing ongoing pressure on the resistance level at 5500 and a few weeks ago it was finally able to move through to a three week high before easing back again to this key level. Several weeks ago it slowly but surely eased away from its multi-year high achieved near 5560 however the following week it fell reasonably sharply and started looking towards the 5400 level which is near where it currently sits. In doing so it returned to back under the key 5500 level which has provided some reasonable resistance over the last few months.

For the bulk of the last few months, the Australia 200 Index has traded roughly between 5300 and 5500 therefore its return to back under 5500 was not surprising. The index has done well over the last couple of months to move steadily higher from support around 5300 up to beyond 5500, forming higher peaks and higher troughs along the way. The support level at 5300 may also be called upon should the index fall lower and will also likely play a role in providing some buffer from any decline. Since February, most of the trading activity has occured between 5400 and 5500 therefore the former level may also be called upon to prop up prices. The index has done very well over the last couple of years moving from below 4000 to its present trading levels around 5500.

A measure of Australian consumer sentiment improved modestly in July as worries about family finances eased, a survey showed on Wednesday, though the depressing impact of an unpopular federal budget continued to linger. The survey of 1,200 people by the Melbourne Institute and Westpac Bank showed the index of consumer sentiment rose a seasonally adjusted 1.9 percent in July, from June when it had inched up only 0.2 percent. The index still has not fully recovered from May's 6.8 percent dive which followed a budget of welfare reforms, cutbacks and increased charges for services. The index reading of 94.9 for July was down 7.1 percent on the same month last year and means pessimists still exceed optimists. Fewer Australians are spiralling into bankruptcy, with figures showing the lowest level of personal insolvency in almost 10 years. Personal insolvency fell nine per cent in the June quarter, Australian Financial Security Authority (AFSA) statistics show. "Bankruptcies are at their lowest annual level since 1995-96," AFSA said in a statement. The figures also showed bankruptcies fell 25 per cent in the June quarter of 2014 compared to the June quarter of 2013. In the same period total personal insolvency activity fell in all states and territories except Western Australia and the Northern Territory.

(Daily chart below)

Australia 200 July 10 at 00:35 GMT 5462 H: 5462 L: 5462

Australia 200 Technical

S3 S2 S1 R1 R2 R3
5400 5300 5000 5550 - -

During the hours of the Asian trading session on Thursday, the Australia 200 Index will be looking to see if it rally again and move back up again through the key 5500 level after pushing through this key level only recently. For most of this year the Australia 200 Index has moved well from the lower support level at 5000 up to the multi-year highs above 5500 in the last month or so.

Further levels in both directions:

• Below: 5400, 5300 and 5000.

• Above: 5550.

Economic Releases

  • 01:30 AU Unemployment (Jun)
  • 05:00 JP Consumer Confidence (Jun)
  • 08:30 UK Trade Balance (May)
  • 11:00 UK BoE MPC - APF Total (Jul)
  • 11:00 UK BoE MPC - Base Rate (Jul)
  • 12:30 CA House Price Index (May)
  • 12:30 US Initial Claims (05/07/2014)
  • 14:00 US Wholesale Inventories (May)

*All release times are GMT