The Australian market is likely to be relatively steady in early trading this morning as investors settle down to wait for more information on the state of world economies. In recent months, markets have been driven by the outcomes of major decisions by central banks and European policy makers. The net effect of those decisions has been to reduce the risks of short term financial crisis and to support asset valuations. What happens from here is likely to depend on the extent of improvement in consumer confidence after these decisions and the flow through impact on growth and corporate profitability. It will take some months for this to become evident in the economic data. In the current environment, China’s economy is likely to be a key focus for investors who have been unsettled by indications that its economy may be weaker than anticipated. Market prices such as spot iron ore will be closely watched as a barometer of the health of China’s key manufacturing and export sectors. The Flash PMI figure due for release on Thursday will be the next data release to provide insight into the state of the economy. From a charting point of view, the S&P/ASX 200 index remains in a medium term uptrend. There is a significant resistance level comprising trend lines and Fibonacci projections around the 4480 to 4520 zone. Near term support is around 4260 to 4270 and the index is unlikely to fall below that level in the near future without a significant change for the worse in investor sentiment.

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