If we get 5400, I'd buy this dip. I think most money managers and even retail would be eager to buy stocks at this level. I suspect that any dip will be a very slow grind and lots of range trading over the day, due to long queue of dip buyers. Things have changed in the past 2 years - people no longer believe media organizations swan song.
I consider NZ to be the canary in the coal mine - our neighbor across the ditch, is a small country with very real problems like every other country, but their data is small and most government releases cuts through the crap and is just straight talking. I love it!
Some highlights from RBNZ - warnings about housing inflation and possibility of contagion seeping into financial markets. High NZD affecting exports (same concerns raised by Stevens RBA note). Deflationary risk till September. Low crude and commodity prices adding to deflation woes. RBNZ mentioned that they may have to do one more cut. In this aspect, Stevens differed and said that he believes that RBA and other central banks may be reaching limit on monetary policy(speech delivered yesterday or the day before?).
Commbank has not passed on the full cut - I think they're worried. CBA report lists - new impaired assets +22%, gross impaired +12% & "troublesome loans" (commercial) were + 13% (via Chris Weston). Their concerns could be similar to RBNZ's.
RBNZ expects risks to disappear in December, so we are likely to get a Santa rally.
This is leading to the same conclusions that I posted few days ago. Red October due to poor earnings caused by weak commodities, strong dollar and massive queue of dip buyers who are hunting for yield. The media is likely to call the mini sell-off in October, a risk-off event, before US presidential election, but I believe underlying reasons are economic. As stock prices come down in October after a mini sell-off there will be buyers (who should be accustomed to buying dips) and we will once again see strength returning in the market.
At the moment I am expecting(hoping haha, won't bet) for a small pull back before dividend season. If we don't get a decent dip to 5400, I suspect the dip in October will be steeper. I will be looking to ditch any long positions after cashing in the big dividend payouts. However, I am not inclined to short the market at present levels as any dip is being bought regularly, price momentum is upward. There are way too many angry buyers and angry short-sellers and gambling against an angry market before a clear confirmation sounds like a bad idea. Further, I don't like getting trapped while shorting this market as there is risk of both paying margin interest and losing dividend payments. For now, I will be day trading small size and buying large if there's a sizable dip.
(20min delay)