Here's my analysis. Not technical in chartwise but technical in terms of demand/supply.
I have a nasty feeling that the market is rising on buyers being forced to buy, not because they want to buy.
In this camp are short sellers, long only funds who have missed the bottom, and momentum traders getting more and more cocky and aggressive by the day.
What we are seeing is not so much plenty of buying, but rather a lack of sellers.
Unfortunately for those in the bearish camp, and I am one of them, it does not seem like it wants to take a break. Which is usually when everyone (even the bears) think this way and adopt a "don't fight the tape, and join the herd" mentality, the market invariably comes off.
A few things:-
1) Australia has yet to experience a serious crunch in house prices. Yesterday's data was a cue to sell off drastically in a light volume market, but China's data came in and buoyed sentiment somewhat, and of course Hong Kong took 4 Viagara on that.
2) In the next 4 days, there are rather large T-bill auctions going on in the US which, if they are not filled properly, could spark some negative sentiment. Especially if cash needs to be yanked out to fill quota.
3) Our banks are still one capital raising away from being set for the long haul. Especially ANZ. I would have assumed, after working in the finance industry for 13 years till last year, you would want to raise capital before the threat of short selling comes back on the radar.
4) There is a rather strange precedent on Macquarie's capital raising. However, that may not stand this time round, as they neatly slotted in a staff allocation of 500 million, which leads me to believe they actually think their share price floor is 27 dollars.
5) Unemployment is still horrendously high. If anyone has tried looking for a job lately, it is murder. You have to go against 100 applicants. The coffee shop owner downstairs of my building has told me he received 190 applications for permanent wait-staff on his ad on Seek.com. I cannot for the life of me understand a stockmarket that is so forward looking that it ignores what its immediately infront of it.
I covered my short SPI last night at 3915, and went short again at 3940 CMC. I hedged my bets by staying long S&P for a run up to 900 but I was a bit disappointed at the gains I made on 11 points on the S&P, until I realised that the aussie battler is at 74 cents.
The Chinese PMI number is the scary one for the shorts. A reading above 50 is indicative of expansionary stage, which is what barred up the Hang Seng last night.
Now, on a fundamental basis, our banks are frightfully expensive. Frightfully. And our market has ran uninterrupted for 7 weeks now, almost a 30% increase in a span of 2 months. The scary thing now is the smaller cap rubbish has started to run.
I think the market will top when the smaller end of town begins to raise capital. Watch for the junior miners trying to raise 20 million here and there. That will be your signal to short this market.
We are most definately in a bear market rally in my opinion. I'm decidedly more bearish than the rest, because I witnessed first hand the sell orders that hit our screens late last year. I refuse to believe such indiscriminate selling was the result of knee jerk reaction, and 6 months on things are better. Meanwhile, I will pick up my 40 points on the XJO now and go for scrambled eggs.
I'm tempted to stay short, but I won't. Took a biggish hit the last two days from 3700. But having said that, this market will probably finish unchanged today.
(20min delay)