Australia 200 - Surges To Six Year High Around 5650

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

By Stuart McPhee

Australia 200 for Thursday, August 21, 2014

The Australian 200 Index has finally been able to crack it and surge higher to a new six year high around 5650 in the last day after enjoying a solid move higher over the last week bouncing off the support level at 5400. In its typical style of late, just prior to the surge, it fell sharply over a couple of weeks returning back to more familiar territory between the 5400 and 5500 levels, before the strong rally. In its recent fall it moved down to a three week low around 5375, however at the beginning of last week it received solid support at the 5400 level which has allowed to consolidate and rally higher. The solid move higher a few weeks ago saw it move strongly up through both the 5500 and 5550 levels to reach a new six year high around 5620. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550, which earlier last week provided some solid support. It reversed strongly several 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.

The 5400 and 5500 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.

RBA governor Glenn Stevens is "quite concerned" that Australia's unemployment rate has reached a 12-year high. Australia's jobless rate jumped to 6.4 per cent in July, official figures showed, surprising market analysts who have been awaiting the governor's thoughts on the shocking rise. In his semi-annual testimony to parliament on Wednesday, Mr Stevens said he was concerned about the rise but reminded people that the current jobless rate would historically be regarded as low. "I'm quite concerned at the thought that unemployment is higher," Mr Stevens said. "I'd still observe that even on the latest reading, it's not that many years ago that six-point-something was regarded as low. "I regard it as not quite low enough actually, but I think we need to keep a bit of historical perspective here on how high it is." Mr Stevens said the RBA's mandate was to achieve full employment as well as price stability. He said the RBA's two-to-three per cent inflation target framework was a good one for keeping both goals in mind.

(Daily chart below)

Australia 200 August 21 at 00:30 GMT 5642 H: 5642 L: 5642

Australia 200 Technical

S3 S2 S1 R1 R2 R3
5400 5300 5000 5650 - -
Click to enlarge

During the hours of the Asian trading session on Thursday, the Australia 200 Index will be looking to see if it can maintain its recent surge and continue to push higher from its recent six year high around 5650. 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: 5650.

Economic Releases

  • 08:00 EU Flash Composite PMI (Aug)
  • 08:00 EU Flash Manufacturing PMI (Aug)
  • 08:00 EU Flash Services PMI (Aug)
  • 08:30 UK Public Borrowing (PSNB ex interventions) (Jul)
  • 08:30 UK Retail Sales (Jul)
  • 12:30 US Initial Claims
  • 13:45 US Flash Manufacturing PMI (Aug)
  • 14:00 EU Flash Consumer Sentiment (Aug)
  • 14:00 US Existing home sales (Jul)
  • 14:00 US Leading Indicator (Jul)
  • 14:00 US Philadelphia Fed Survey (Aug)

*All release times are GMT