All the standard indicators point to the ASX 200 holding its opening gains. However, yesterday afternoon’s limp performance may have traders alert to the possibility that profit takers are developing itchy trigger fingers.

Yet another positive lead from US markets and further gains in iron ore create a positive background for investors today. The main question now will be whether local valuations are now fully reflecting the upcoming reporting season.

One case in point will be the electronics retailers JB Hi-Fi and Harvey Norman, which have rallied hard recently. While the market remains nervous about the longer-term prospects of these stocks, traders are reacting to reports that the bears were too pessimistic about year-end sales and Amazon’s short-term impact.   

However, JB Hi-Fi has now recovered to a valuation of around 12.6 times forward earnings. It is also testing the resistance of the peak it established last August. How it handles this resistance, could establish near term direction as the market waits on the upcoming sales and profit report

The Aussie Dollar is showing its first signs of nervousness for some time.  The US Dollar is beginning to rally as profit takers cover shorts with upward momentum assisted by a weak Euro. Markets are, understandably considering the implications of political uncertainty in Germany, which is struggling to form an effective government after the elections.

This nervous environment for the Aussie Dollar creates downside risk if Building Approvals numbers show signs of yielding to softening housing prices with a significant downside miss this morning.