Opinion: The storm returns Price: 3560 EXITED Technical Points Resistance Major 2 3745 Minor 3700 Major 1 3655 Minor 3622 Gravitation 3589 Minor 3544 Major 1 3499 Minor 3466 Major 2 3433 Support Analysis: In Brief:
Overseas US markets finished sharply lower, locking in a sixth straight session of losses, on much worse than expected retail sales figures The Dow shed 248 points (-2.9%), the S&P500 shed 29 points (-3.4%) and the Nasdaq closed 57 points lower (-3.7%) The UK market slumped to its lowest close in a month with financial stocks the hardest hit The FTSE 100 closed 219 points lower (-5%) Commodities Oil fell away following after inventories rose to a 16-month high Oil finished at US$37.28 a barrel, down a further 50 cents (-1.3%) Gold declined to a five-week low with gains in the US dollar further eroding the precious metal’s appeal Gold finished US$11.90 lower (-1.5%), closing at US$808.80 an ounce Base metals were all weaker with aluminium (-4.2%) and lead (4.1%) the biggest losers Ex-pat stocks Virtually all Aussie stocks closed lower on Wednesday night BHP down 8.6% in the UK, down 6.5% in the US. RIO down 11.3% in the UK, down 9.7% in the US AQP down 13%, AWC down 12.3%, LGL down 8.5% Companies RIO – Chairman Paul Skinner to retire on 20 April, eight months ahead of schedule AGO – announced a maiden inferred resource at Wodgina Brokers BHP – downgraded to Neutral (from Outperform) by CS ERA – upgraded to Buy (from Hold) by UBS CSR – upgraded to Neutral by CS We’d been suggesting that the market was building toward a selldown, with other indicators of risk like key currency crosses and commodities tumbling earlier in the week, and last night the selling came to pass.
A combination of much weaker-than-expected retail sales, a sharp drop in demand for oil, and more worries from the financial stocks sent US markets into their worst performance in more than a month.
US markets were down more than 3% and are moving back to levels not seen since November.
Locally, apart from the gloom in overseas markets, we also have unemployment numbers at 11.30 this morning.
These numbers will be crucial in providing evidence in regard to how our economy is performing, and we also have RIO’s fourth-quarter production, so get ready for a big day in the market today. We are likely in for a volatile session.
Likely Price Action: When we left you, we had open short positions entered at 3670, and commented on our strong view that price was going to rotate back down into 3560 today.
The market sold off right from the overnight open and down into the early morning session, completing what was a huge range of movement of over 150 odd points – that’s almost 4% in one night!.
The market moved well below the trade's target at 3590, but we are generally pretty happy to take a profit that is two-to-one of our risk.
Looking to today, the sell bias remains the same, as the dynamics have not changed.
There is clearly technical confluence at the downtrend line and horizontal intercept at the 3640 resistance (shown on chart).
We can expect sell pressure whilst the SPI remains under the downtrend line at 3640.
There could be some upward counter trend movement this morning, so we would not hold shorts this morning and would instead consider exiting and re-entering higher.
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