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By Stuart McPhee

Australia 200 for Tuesday, July 22, 2014

The Australia 200 Index has found a new key level to deal with in recent weeks as it has been able to consistently move through the 5500 level however it has now run into a short term resistance level at 5550. The question of whether or not the Australia 200 Index would be able to maintain its break through the key resistance level at 5500 may been answered over the last few weeks when 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 reversed strongly a couple of weeks ago bringing it back down to almost touch the 5400 level before rallying back higher again. At the beginning of June 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 for an extended period. 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 occurred 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.

The national housing market continued to post double-digit annual price rises last week as the winter rebound entered its sixth week. After falling for a total of 2.4 per cent through most of May and early June, RP Data's gauge of auction prices in the mainland state capitals has now bounced back by 3.4 per cent, with annual growth at 11.0 per cent. That rebound included the 0.2 per cent gain racked up in the week to Sunday, figures from RP data on Monday showed. So far this year, prices are up by 5.2 per cent. In comparison, the year-to-date gain this time last year was 4.1 per cent, a gain that was translated by a strong second half into an annual rise of just under 10 per cent. The latest weekly rise was the smallest since the first of the current run that began in the second week of June, but that does not the market is topping out. There was a similar slowdown in price rises in early July 2013, but the market kept on rising, with a couple of flat spots but no significant pullback, until early this winter. This pattern is apparently being repeated this year. Melbourne appears to have stolen the crown of star performer from Sydney, with a surge of 7.6 per cent per cent from the recent low in mid-June, versus Sydney's 3.1 per cent bounce.

(Daily chart below)

Australia 200 July 22 at 00:35 GMT 5528 H: 5528 L: 5528

Australia 200 Technical

S3S2S1R1R2R3
5400530050005550--

During the hours of the Asian trading session on Tuesday, the Australia 200 Index will be looking to see if it rally again and move back up again through the key 5550 level after moving through to this in the last couple of weeks. 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

  • 04:30 JP All Industry activity index (May)
  • 05:00 JP Leading indicator (Final) (May)
  • 08:30 UK Public Borrowing (PSNB ex interventions) (Jun)
  • 10:00 UK CBI Industrial Trends (Jul)
  • 12:30 US CPI (Jun)
  • 13:00 US FHFA House Price Index (May)
  • 14:00 US Existing home sales (Jun)

*All release times are GMT

Source: Australia 200 - Struggling At Resistance At 5550