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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