In contrast, the ASX (XJO, or whatever it is called) has well and truly fallen over the edge of the precipe into the Sea of the Abyss, and sunk beneath the waves of the ever lasting sunset.
Daily gyrations in Australia are now broad-ranging 1.5% between the intra-day highs (typically early in each trading session) and the intra-day lows (typically, late in the trading day).
That's upwards of a 55-60 intra day extreme movement, and down it continues to go, even in the face of such things as the DOW closing flat, up, or indifferent.
The trouble is, corporate earnings in America are holding up, much to the disdain of their critics. Where they may be missing their mark is in matching analyst expectations.
More often, corporate earnings are exceeding prior period comparisons, and are approximating to, or exceeding Street expectations, even though those expectations have not been endorsed by the companies concerned.
In contrast, Australian corporate earnings are neither matching analyst /Street expectations, nor are they meeting their own internal corporate expectations.
According to yesterday's AFR, some 85 corporates have issued local profit warnings in the last few weeks alone. That's ~6% of the total ASX Board, with many more to come.
Indeed, Oz Equities has just reported, as part of its daily 'Hot & Spicy' that: "A leading broker said the profit warnings from small to mid cap stocks during the last two weeks are a harbinger of further downgrades, especially from large cap companies as the market moves to the traditional period of the June pre-reporting “confession” season. Stocks that depend on the contribution from margin expansion are clearly at risk, the broker says, including LEI, FCL, PBG, TEN, CSR, BIL, FXJ, OST, CML, ORI, PRK and Amcor."
Now, that's a lot of "red" ink flowing free.
A lot of this has had something to do with our high (and unsustainable) currency, and with the difficulties being encountered in getting Europe to "fire up".
And yet, when the FED earlier today again raised rates by 25bp, and the RBA held firm, the A$ (after initially falling back) has since regained its earlier lost ground and is again moving higher.
What this says for the broader market is that many, many more Australian companies will now start issuing their own profit warnings, and the ASX will continue to fall lower.
Some have on this forum suggested a 3800 bottom for the XJO, but given that the 3900 level has almost been breached, I would not now be surprised to see a 3400 XJO by October (although, anything in a 3400-3600 range is very likely), driven largely by an over-priced, inefficient local market which is commodity based, speculatively driven, and is now feeling the fierce headwinds of an uncontrollable A$.
Forget about all the arguments concerning returning to a gold standard, or the debasement of the currency, given its ongoing fiat status - the A$ has even less dynamic backing (gold wise, fundamentally, economically, and globally) than does the US$ or any of the other major, internationally traded currencies.
The difference - whereas the US$ has already fallen close to 40% since April 3, 2001, the A$ has risen by over 60% from 48.33 to 78.
3 years back in 2002 (May 3, 2002), the A$ was worth 53.56c in US$ terms. That meant that A$1.00 = US$0.5356, and US$1.00 = A$1.87.
Now, A$1.00 = US$0.78, and US$1.00 = A$1.28.
That's a near 32% fall for the US$ measured relative to the A$, and a 46% rise for the $A measured relative to the US$.
No wonder many of our companies are hurting so much.
And, no wonder that the ASX has got that much further to fall as its continuing "love" status starts faltering in the eyes of the international investment community.
If the DOW is in for the fight of its life, then the ASX and the XJO is already on "full" life support and sooner or latter the ethicists will be debating whether to turn off the machines that currently sustain life.
As always, it remains quite easy to bash the DOW, whilst failing to even notice the local wildfires that are spreading locally.
DOW Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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