See important Research Disclaimer.
With that in mind, I suggested a new and higher trading range had been established for the ASX, with an ultimate target defined in a band of 6175-6242. In the meantime, however, I identified a short-term trading target with parameters defining a tight band at 5403-5425. With an intraday high of 5457 recorded in late October, this trading target has now arrived, and trading profits may be booked.
Much negative comment has been made regarding the end of Australia's mining and construction investment boom. While mining investment has slowed, and I believe should continue to do so, I feel this negative discussion misses the bigger issue. Investment is naturally followed by production, or to put it another way, we see the fruits of that earlier investment. Australia is now at the beginning of a new mining production boom, exactly as that earlier investment and construction had anticipated, and stands ready to reap the rewards accordingly. So the progression from investment to production can be viewed as a successful milestone, and given the more enlightened and positive spin it clearly deserves.
While longer-term investors should choose to ignore the nuisance resistance now upon us, traders can remain on the sidelines and watch for a lower-risk reentry point. A mild correction back to 5229 would be one such opportunity, where a 4.165% pull-back will be complete.
Recommendation: Neutral. Longer-term investors should continue to target 6242. Traders should look to re-enter and buy on a pull-back to 5229.