Recent days have seen an unexpected sell-off followed by a violent rally, leaving traders more than usually uncertain about what today has in store for the ASX 200 index. Yesterday’s market action on the ASX had the appearance of macro, index related buying. In the absence of a lead from US markets, the key issue for local markets today may be whether yesterday’s macro buying has been completed.

Markets have a watching brief on global tensions following North Korea’s missile test. However, there has been little evidence of support for safe haven assets at this stage.  Gold, for example, broke below established chart support on Monday and remains comfortably below resistance at this stage. 

The Aussie Dollar also broke below chart support yesterday in what could be a significant sign of weakness. This came despite stronger than expected retail sales data and suggests some traders may have been looking for more hints of a tightening bias from yesterday’s Reserve Bank statement.

Better than expected gains in Australian retail sales during May are encouraging. Taken together, the April and May retail sales data indicate a solid rebound from weather related weakness in the first quarter.  The recovery was centred on discretionary areas such as household goods; apparel; cafes and restaurants and suggests that the improving job market has assisted consumer spending.