The ASX fights the good fight

The ASX managed to fight its way into the green (if only just) as defensives prop up the market.

The ASX added a single point to 4670 as the banks, WOW, WES and TLS finally found support, having fallen through the yield-support level over the last 12 months.

Telstra does have a big floor at $4.50; it took the stock six trading sessions to punch through this level on the way up and it should be a massive support level on the way down. The banks are in a similar position; each time ANZ hits $26.50 it bounces off this level as the yield jumps to 7% net.

It does show that even in this market where macro events continue to heap pressure on the overall market, bargain hunters are willing to jump in at cheap entry points.

However, BHP is again under short-selling pressure; the stock dropped 3.24% to $31.25 yesterday and has lost a further 1% today. The stock is now at the levels we saw in late April, having dropped back into the high $30 range. It does pop up from this range fairly quickly but if China’s cash squeeze continues it will push BHP lower in the interim.

What is clear from the last few days is that the bottom is going to be very hard to predict. The more the China cash squeeze ramps up the further materials will fall. The more the US cries fowl for having the liquidity taken away from them the more the whole ASX will fall.

So the wedge the ASX is experiencing will continue until the dust settles from both sides of the Pacific and that unfortunately is at least few months away.

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