By Stuart McPhee
Australia 200 for Wednesday, July 30, 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 and a new high again today. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550, which in the last few days has provided some solid support. It reversed strongly a few 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.
Consumers have got their groove back, having shaken off their woes about the federal government's planned budget cuts. The latest weekly ANZ-Roy Morgan survey shows consumer confidence levels at a seven-month high, rebounding from a slump in April and May sparked by news of spending cuts. Confidence levels rose 2.4 per cent in the past week, adding to recent gains and giving more weight to the theory that the recent falls were related to temporary shock from the budget. ANZ chief economist Warren Hogan said confidence levels were now back in line with business confidence. "Consumer confidence is now back to pre-budget levels and consistent with moderate growth in consumption and economic activity," he said in a statement on Tuesday. "The good news is that the headline impact of the budget appears to be temporary and the more enduring features of the economy, such as rising share and house prices, job creation and a stable world economy are now driving consumer attitudes to spending and finances." Economists believe that with consumers feeling more confident, retail sales should pick up. Meanwhile, a separate survey found that business confidence also appeared to be improving, with the number of new company start ups rising more than a fifth in the June quarter. The Dun and Bradstreet survey also found that nearly two thirds of respondents were more positive about the economy than a year ago.
(Daily chart below)
Australia 200 July 30 at 02:05 GMT 5585 H: 5589 L: 5565
Australia 200 Technical
During the hours of the Asian trading session on Wednesday, the Australia 200 Index is moving strongly off the new key 5550 level which has seen it move to another six year high. 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.
- 23:30 (Tue) JP Unemployment (Jun)
- 23:50 (Tue) JP Industrial Production (Prelim.) (Jun)
- 09:00 EU Business & Consumer Survey (Jul)
- 12:15 US ADP Employment Survey (Jul)
- 12:30 CA Industrial product price index (Jun)
- 12:30 CA Raw Materials Price Index (Jun)
- 12:30 US Core PCE Price Index (1st Est.) (Q2)
- 12:30 US GDP Annualised (1st Est.) (Q2)
- 12:30 US GDP Price Index (1st Est.) (Q2)
- 18:00 US FOMC - Fed Funds Rate (Jul)
*All release times are GMT