ASX 200 stalls

Two short weekly candlesticks suggest the ASX 200 rally has stalled at 5500. Bearish divergence on Twiggs Money Flow warns of selling pressure. Reversal below the lower trend channel would warn of a test of primary support at 5000/5100. Breakout above 5600 is unlikely.

ASX 200

The ASX 300 Banks Index is testing resistance at 8000. Declining Twiggs Money Flow still warns of selling pressure. Breakout above 8000 would signal a primary up-trend but I would be cautious and wait for retracement to respect the new support level. There are some good fundamental reasons, like the real estate/apartment bubble, that suggest a reversal would be premature.

ASX 300 Banks Index

Government aims for wrong target on debt | MacroBusiness

Macrobusiness quotes LF Economics’ submission to the House of Representatives Budget Savings (Omnibus) Bill 2016:

….It is critical policymakers reign in exponentially-growing private sector debts as this consists of a major source of future financial instability. Australia’s household debt to GDP ratio is the highest in the world, at 125% and rising. Ironically, by ignoring private debt expansion which has generated a housing bubble, public debt will inevitably rise to stimulate the economy to counteract the economic downturn when it bursts.

Source: Government aims for wrong target on debt – MacroBusiness

Kevin Andrews and the challenges for Australian conservatism

By William Hill:

The Liberals …have to decide how to confront the anti-business, anti-immigration trend that is developing on their right flank.

John Howard was able to manage One Nation by moderating his criticism and by appearing to assuage some of their concerns. On the BBC Howard responded to a criticism of his refugee policy by arguing that the handling of the former helped to mitigate opposition to orderly migration.

Concerns are real and perceived but the economic insecurity confronting so many Australians and their children is a palpable thing. Some people voice their frustration by voting for a moderate protectionist such as Nick Xenophon and others hitch themselves to One Nation’s more assertive and aggressive style. The Liberals are in difficulty when so many of its natural voters are suspicious of capitalism and the importation of more and more people into the country.

……The supporters of Hanson, Xenophon, Lambie and Katter do not feel that the present arrangements in parliament are working for them and we should not rush to dismiss them. We should also give these voters the benefit of the doubt that they do not share the faults and naiveties of the people they have elected. Andrews advocates a more conciliatory approach when it comes to Hanson’s supporters:

“You have to listen to their concerns, the fact that a person votes for One Nation doesn’t mean that they are a racist, redneck, homophobic whatever. Some might be but usually there is an underlying concern about the direction of the country and the direction of the economy that’s motivating them.”

That underlying concern is nothing less than their fear for their economic wellbeing and that of the next generation. If the Liberal Party is going to defend free enterprise, free trade and immigration against protectionists and nationalists then it had better do as Howard did successfully and give the concerns of the latter fair hearing.

Source: Kevin Andrews and the challenges for Australian conservatism after Hanson – On Line Opinion – 21/9/2016

Australian banks rally

The ASX 200 is headed for another test of resistance at 5600. Bearish divergence on Twiggs Money Flow warns of selling pressure. Breakout above 5600 is unlikely and breach of the lower trend channel would warn of a test of primary support at 5000/5100.

ASX 200

* Target calculation: 5400 + ( 5400 – 5100 ) = 5700

The ASX 300 Banks Index formed a bullish higher trough above 7200 and is again testing resistance at 8000. Declining Twiggs Money Flow, however, warns of selling pressure. Respect of resistance remains likely. Breakout, however, would signal a primary up-trend.

ASX 300 Banks Index

TPG shares drop more than 20 per cent on disappointing forecast

From Lucy Battersby:

The market has fallen out of love with telco company TPG….

The cut-price telco beat guidance by just $300,000 when it has a history of beating guidance by tens of millions of dollars.

It has also forecast earnings growth of 7 per cent this year, the lowest growth forecast in seven years.The reasons for the soft result include plans for more capital expenditure than usual, its future profit margins are likely to be squeezed on the NBN, and there are few obvious acquisitions left after swallowing up iiNet and AAPT in recent years…..

Source: TPG shares drop more than 20 per cent on disappointing forecast

Australia: ASX 200 weak but support for banks

The ASX 200 penetrated its lower trend channel, indicating that the up-trend is slowing. This week’s long tail indicates short-term buying pressure but not necessarily a reversal. Breach of primary support at 5100 would warn of another decline (4700). Bearish divergence on Twiggs Money Flow indicates long-term selling pressure.

ASX 200

The ASX 300 Banks Index is consolidating between 7200 and 8000. Declining Twiggs Money Flow peaks warn of long-term selling pressure but this week’s blue candle suggests short-term support. A test of primary support at 7200 remains more likely but a failed swing that recovers to 8000 would be a bullish sign. Breakout above 8000 (still unlikely) would signal a primary up-trend.

ASX 300 Banks Index

Did the RBA just signal the end of rate cuts?

From Jens Meyer:

Did the RBA just signal the end of rate cuts and no-one noticed?

Well, not exactly no-one. Goldman Sachs chief economist Tim Toohey reckons the speech RBA assistant governor Chris Kent delivered on Tuesday amounts to an explicit shift to a neutral policy stance.

Dr Kent spoke about how the economy has been doing since the mining boom, and in particular how its performance matched the RBA’s expectations.

Reflecting on the RBA’s forecasts of recent years, Dr Kent essentially framed the RBA’s earlier rate cut logic around an initial larger than expected decline in mining capital expenditure and subsequent larger than expected decline in the terms of trade, Mr Toohey said.

Having so closely linked the RBA’s easing cycle to the weakness in the terms of trade (and earlier decline in mining investment), Dr Kent’s key remark was to flag “the abatement of those two substantial headwinds” and highlight that this “would be a marked change from recent years”….

Source: Did the RBA just signal the end of rate cuts and no-one noticed?

Australia weeks from a housing collapse, US report warns

Washington-based International Strategic Studies Association warns that Australian banks’ crackdown on foreign investor lending may precipitate a collapse in the apartment housing market:

“The banks clearly believe Australian real estate values will decline, so they are attempting to avoid that risk. They’ve learned from the US collapse that seizing real estate collateral is a no-win scenario when the volume is great and the market slow.”

“In so doing, they precipitate the market collapse but are less exposed to it.”

It comes after Australia’s richest man, billionaire property developer Harry Triguboff, warned that a “very significant” number of Chinese buyers were now failing to settle their off-the-plan units and urgent action was needed.

But Mr Triguboff, founder of Australia’s biggest apartment builder Meriton, warned the real risk was looming in the new wave of developments. As apartment price growth stalls or goes backwards, the risk of buyers walking away from their deposits grows.

Source: Real estate: Property price crash ‘six weeks’ away, US report warns

Hat tip to Macrobusiness.

Gold finds support

Spot Gold found support at $1325/ounce after retracing from resistance at $1350. Short candles suggest weak selling pressure. Respect of support at $1325 would signal another test of the July high at $1375. Follow-through above $1350 would confirm. Breakout above $1375 would offer a target of $1450* but expect strong resistance if the Fed appears intent on raising interest rates. Breach of support at $1300 is unlikely but would warn of a test of primary support at $1200/ounce.

Spot Gold

* Target calculation: 1375 + ( 1375 – 1300 ) = 1450

In Australia the All Ordinaries Gold Index ($XGD) is testing support at 4500. Respect is likely and would signal a test of the recent highs around 5600. A weakening Australian Dollar/US Dollar would tend to mitigate the impact of a fed rate hike. Breach of 4500 is unlikely but would warn of trend reversal.

All Ordinaries Gold Index $XGD

* Target calculation: 5500 + ( 5500 – 4500 ) = 6500