By Stuart McPhee
Australia 200 for Thursday, August 28, 2014
The Australian 200 Index has finally been able to surge higher to a new six year high around 5650 late last week before easing off to finish out the week. However since that time it has done very little but consolidate around 5620. In moving up to the multi-year high it enjoyed a solid move higher bouncing strongly off the support level at 5400. 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 recent strong rally. In its recent fall it moved down to a three week low around 5375, however it received solid support at the 5400 level which has allowed to consolidate and rally higher. The solid move higher throughout July 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.
Consumer confidence in Australia is back above its long-run average, according to the ANZ-Roy Morgan Weekly Confidence index released yesterday. The index showed a 0.9% increase to 113.5 in the week ending Saturday the 24th of August. This weekly index has been volatile lately as consumers reflect and react to the various budget measures and the to-ing and fro-ing in the Senate. But ANZ sees a solid sign in the sub-indices within the index which suggest that the outlook for retail consumption is improving. "Importantly, the improvement was driven almost entirely by an 11.1% rise in household perceptions about their 'financial situation compared to a year ago', the subindex most closely correlated with consumer demand," the bank said in the press release accompanying the index. "This is now above average levels (since 2001) and is an encouraging sign for consumer spending in coming months." Warren Hogan, ANZ's chief economist, was really positive about the impact of the bounce in the index, saying that: "Signs that consumer confidence is bouncing back, combined with strengthening business surveys, gives us more confidence that the non-mining recovery remains on track."
(Daily chart below)
Australia 200 August 28 at 00:30 GMT 5624 H: 5624 L: 5624
Australia 200 Technical
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.
- 23:50 (Wed) UK GfK Consumer Confidence (Aug)
- 23:30 (Wed) JP CPI Core (Nation) & (Tokyo) (Jul)
- 23:30 (Wed) JP Real Household Spending (Jul)
- 23:30 (Wed) JP Unemployment (Jul)
- 23:50 (Wed) JP Industrial Production (Prelim.) (Jul)
- 23:50 (Wed) JP Large Retailers Sales (Jul)
- 23:50 (Wed) JP Retail Sales (Jul)
- 01:30 AU Capital Expenditure (Q2)
- 08:00 EU M3 Money Supply (Jul)
- 09:00 EU Business Climate Index (Aug)
- 09:00 EU Consumer Sentiment (Aug)
- 09:00 EU Economic Sentiment (Aug)
- 09:00 EU Industrial Sentiment (Aug)
- 12:30 CA Current Account (Q2)
- 12:30 US Core PCE Price Index (2nd Est.) (Q2)
- 12:30 US GDP Annualised (2nd Est.) (Q2)
- 12:30 US GDP Price Index (2nd Est.) (Q2)
- 12:30 US Initial Claims
- 14:00 US Pending Home Sales (Jul)
- EU General Affairs Ministers Hold Meeting in Italy (to 29th)
*All release times are GMT