ASX 200 searching for new buying support, crude oil back at post-GFC lows, ASX futures down 7 points

The ASX 200 is making fresh seven-month lows, which will see traders focus on the January 2015 closing low of 5,300. As far a logical key levels for the ASX 200, should selling persist, 5,300 is the next relevant area of potential buying support now that the ASX 200 has closed below the previous June 29 closing low 5,422. There is no logical reason to think that the market will continue to sell off--especially given that a lot of the re-pricing of Australian financial stocks has taken place and no evidence of contracting earnings in that sector has come to light--but when we take a look at today's first chart, there is some evidence that we could be resuming a downward trend pattern.

For those interested in commodity trading, US West Texas Intermediate (WTI) crude oil prices are sitting back at their post-GFC lows. This interests me a lot, given that it has reversed the US$20 March-June recovery completely and will again put a cap on global headline inflation rates. This is important, because it is one more factor in a confluence of factors leading into a very important policy decision date - 16/17 September Federal Open Market Committee meeting, which will revisit economic projections and be followed by a press conference by Fed Chair Janet Yellen. This will likely let the market know whether a 2015 rate rise is on the cards.

In addition to falling oil prices (which will stand in the way of the Fed using inflation as an excuse to hike rates), the devaluation of the Chinese yuan will also act as a deterrent to prevent the US from antagonising the Chinese by raising rates, which would both cause the yuan to appreciate again and have the effect of devaluing bond prices in the secondary market. The US Fed has previously stated that oil markets had stabilised - I'm not sure they can continue to project that opinion, given that US crude prices have fallen by one third in the last seven weeks.

Source: Rivkin, Saxo Bank

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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via or by phoning +612 8302 3600.

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