The stock market looks set for a stronger open today as international markets continue to remove risk premium with buyers looking to take advantage of the opportunity created by recent selling.
The ASX 200 index is likely to be assisted this morning by a steady to positive tone in resource stocks. Profit taking in the major industrial metals was isolated to copper over the past day. Both iron ore and aluminium were firm and this should support mining stocks in early trade.
The ASX 200 index is now getting close enough to well defined resistance around 5800/5830 for traders to start thinking about the probability of the market peaking around these levels yet again.
It may be pay to be cautious about being too aggressive in assuming that the ASX 200 will remain confined to its trading range this time around.
It’s true there are factors that may yet again limit the rally in ASX 200. These include the fact that residual caution remains, especially over the North Korean situation. This is evidenced by the relatively minor pull back in the gold market at this stage. The index is also approaching the top of its range after major gains in base metals and while a cloud remains over Commonwealth Bank.
Offsetting these concerns is the fact that equities are benefitting from a supportive economic environment. This includes an improving labour market; low interest rates and limited cost pressures outside energy. This time could be different with the ASX 200 popping through the top of its range toward 5900. Traders looking to fade the 5800 resistance may decide to wait on evidence that the market is actually turning down from these levels before selling
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