Australia 200 - Eases Away From 6 Year High Back To 5550

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 |  Includes: AUSE, EWA, FAUS, QAUS
by: Dean Popplewell

By Stuart McPhee

Australia 200 for Monday, July 28, 2014

The Australia 200 Index will be looking to see if it can maintain the break above 5550 after reaching a six year high in the middle of last week. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550. Over the last couple of days it has struggled at this new level and just eased away slightly before surging higher recently. 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 house price boom shows no sign of cooling despite the onset of winter. Price growth in almost all capital cities in the three months to June has helped the median Australian house price soar almost 11 per cent in just 12 months. Sydney is leading the surge, where the median house price climbed by more than $100,000 in the year to June, or 17 per cent, to hit a record $812,000. Melbourne recorded 10 per cent growth to $608,000, according to the latest report from Australian Property Monitors (APM). June quarter prices showed capital city housing markets are showing no signs of slowing down, APM senior economist Dr Andrew Wilson said. "Most capital cities are maintaining or exceeding the solid to strong prices growth levels recorded during the previous quarter," he said. "Other leading indicators of housing market activity such as home loan activity and auction clearance rates point to continued solid buyer activity through 2014." Canberra was the only capital city not to have an increase in house prices in 2013/14, dropping by 0.5 per cent to a median price of $576,000. Despite strong growth in median house prices, unit prices were more varied. Sydney's 13.3 per cent growth did pull the national average up to 8.3 per cent, but Brisbane, Canberra and Hobart all fell.

(Daily chart below)

Australia 200 July 28 at 00:15 GMT 5553 H: 5553 L: 5553

Australia 200 Technical

S3 S2 S1 R1 R2 R3
5400 5300 5000 5550 - -
Click to enlarge

During the hours of the Asian trading session on Monday, the Australia 200 Index will be looking to see if it can reverse and continue to move higher above the 5550 level after reaching a six year high in the middle of last week. It is presently trading above the key levels of 5500 and 5550 and will be looking to see if it can maintain the break and stay above. 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

  • 06:00 UK Nationwide House Prices (28th-1st) (Jul)
  • 14:00 US Pending Home Sales (Jun)

*All release times are GMT