S&P 500 marginally higher after a mid-session sell-off, ASX futures down 18 points

Australia's ASX 200 had a solid day yesterday (+1.8%), which completed a two-day rally to erase Tuesday's 3.8% drop. The market will shed a handful of points this morning given that neither Europe nor the US managed to follow through from Asia's lead; however, the ASX 200 will likely hover around 5,100 during the open and this will hopefully put us back within reach of a break higher above the 5,150 or even 5,200 next week if things remain stable. On today's first chart you can see that while the ASX 200 index (not futures) did break new ground this week, following Tuesday's move lower, it has popped back into its previous consolidation range of between 5,000 and 5,250 on the emergence of strong buying support below that 5,000 level.

The second index illustrates this week's move using a 10 minute chart of the ASX 200 SPI futures contract expiring in December, and this shows in a little more detail this week's recovery and you can see that the high of around 5,100 will be the short-term point of selling resistance today for short-term traders. This will act as either a point at which traders will take short positions below (i.e., using the 5,100 level as selling resistance and anticipating that the market will trade lower than that); or it will act as a point by which long traders will be on the look out for a break above to trigger buy signals.

Lastly I've shown the AUDUSD currency pair again, which remains in a short-term up-trend, continuing to make small gains and experience higher intra-day lows. There's an article in today's AFR that may give markets a little boost of optimism today - it cites a release overnight form the International Monetary Fund that speculates on China's relatively high holdings of Aussie dollar bonds, suggesting that 20% of the buying in the Australian fixed income market could be linked to the Chinese. If economists wanted to focus on this as a theme, it could help support lower bond yields in Australia (yields fall as bond prices rise), which would be a positive for corporations. But it's not conclusive - let's see if gets any attention.

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 info@rivkin.com.au or by phoning +612 8302 3600.

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