It was perhaps fitting that Melbourne Cup Day provided traders with sufficient confidence to push the Aussie stock index to a post GFC high.
Yesterday, the ASX 200 index finished above resistance and the high established in 2015. However, the index is yet to clear resistance by sufficient margin to be confident this is not yet another false break. More evidence is needed.
As traders were reminded on several occasions over recent months, it is common for markets to test the limits of a trading range, often breaking narrowly through it. This happened on several occasions as the ASX 200 made minor breaks below the bottom of the trading range over recent months, only to rebound strongly.
While the ASX 200 broke only narrowly into new high ground yesterday, it did so with good trading volume, finishing close to its high for the day. These are often indications of ongoing momentum that could yet re-emerge over coming days to push the index convincingly clear of resistance, indicating renewed confidence. Time will tell.
While resource stocks are likely to be a drag on the index this morning, banks could support it after a solid quarterly profit result from CBA.
The short covering rally in oil paused last night and could falter unless there are fresh developments in the Middle East. At the same time volatility has lifted in industrial metals. A bout of profit taking in overnight markets is likely to see mining stocks lower on the open.
CBA has produced a solid quarterly profit report with a pleasing lift in revenue due to both volume growth and improved interest margins. This should help restore some confidence in the outlook for CBA as markets wait on a change of leadership and the outcome of money laundering charges.
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