The NZ50 Index is retracing to test 3300, but 13-week Twiggs Money Flow deep below zero warns of strong selling pressure. Respect of resistance is likely, followed by another test of support at 3100.
* Target calculation: 3300 – ( 3600 – 3300 ) = 3000
The ASX 200 is headed for a test of 4500. Declining volume is typical of such a rally; a surge would indicate increased selling pressure — especially when accompanied by a narrow range or red candle. Expect resistance at 4500 to hold, followed by another test of support at 4000.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
The Australian Dollar continues in a downward trend against its Kiwi counterpart. Recovery above $1.26 would test the upper channel at $1.28, but breakout below $1.23 is just as likely and would continue to test the lower channel border.
* Target calculation: 1.28 – ( 1.32 – 1.28 ) = 1.24
The Australian Dollar broke support at $1.04 against the greenback, signaling a correction to the long-term trendline. Support at parity has so far held and recovery above $1.045 would indicate another test of $1.10.
* Target calculation: 1.04 – ( 1.10 – 1.04 ) = 0.98
The Aussie dollar displays a similar long tail to the ASX 200, indicating that buying support on the Australian stock market came from international, not local, buyers. Dolphin tells us that institutional buyers moved in when AUD fell below parity against the greenback.
The ASX 200 closed in positive territory for the day, accompanied by strong volumes indicative of today’s institutional buying across the Asia-Pacific region. Expect a dead cat bounce — a rally to re-test resistance levels — but the bear market is not miraculously over and may take several months to resolve.
In a recent report, ANZ estimates that Australia needs to spend about 600 billion Australian dollars (US$626 billion), or the equivalent of 8% of GDP, over the next five years to bring its infrastructure “up to acceptable standards.” It argues that the country needs to invest around 1% of GDP annually just to improve its road network over the medium term.
The ASX 200 was trampled Monday by the stampeding herd, reaching its medium-term target of 4000* in 4 days. There are no signs of a retracement so far. This could even re-test the 2009 low of 3200 in the next few weeks.
* Target calculation: 4500 – ( 5000 – 4500 ) = 4000
The Dow Jones New Zealand Index ($NZDOW) gapped down at Monday’s open, foretelling a miserable day for Asian markets.
Posted August 3, 2011 8:00 p.m. ET (10:00 a.m. AET) on Trading Diary.
After several tentative attempts, the ASX 200 broke through support at 4500, following Brazil into a primary down-trend. Wednesday’s follow-through below 4450 confirmed the signal. 21-Day Money Flow below zero indicates selling pressure. Expect retracement to test resistance at 4500, but target for the breakout is 4000*.
* Target calculations: 4500 – ( 5000 – 4500 ) = 4000
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