Day three: our Australia 200 trade

With the S&P 500 re-opening after the Presidents Day holiday and putting on a modest gain, we have seen the Australia 200 cash move above 5400. 

Momentum is to the upside at present, with the MACD on the daily chart both above the signal line, while also above zero highlighting better trending conditions. A move to 5450 can’t be ruled out in the short term; however we will need to see the S&P 500 break out to print a higher high in the short term.

Chinese markets fell yesterday as a result of the PBOC draining $7.9 billion from the markets through a repurchase agreement, and with liquidity being drained from the system, Chinese stocks struggled. A further fall today could take some of the wind out of the Australian market, which has been buoyed not just because of good earnings domestically, but also from the solid platform provided from overseas markets.

On the docket today there is Australia Q4 wage cost data at 11:30 and this could feed into inflation expectations, especially with traders expecting a fall from 2.7% to 2.5% annualised growth. However, index and equity traders will pay greater attention to earnings from the likes of FMG, WPL, MGX, SUN, SXL, WES, BXB and SEK.

If you look at the price action on the daily chart, not only are we seeing range contraction, but there is indecision starting to come into the local market. The oscillators still haven’t given off any glaring sell signals as yet, but with the threat of Chinese markets struggling in the short term and Japanese markets feeling yesterday’s actions from the BoJ weren’t that bullish, we could see the ASX 200 struggle. With this in mind I am taking profits on the trade for a 33 point gain.  

Australia 200
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