y Michael McCarthy, Chief Market Strategist, CMC Markets Australia
After surprisingly weak trading yesterday, the Australia 200 index is roaring ahead today. A benign Federal Reserve announcement, rallies in precious metals and strong leads from US (and to a lesser extent European) share markets have the bulls springing back to life. So, is it time for a breakout?
In my opinion the answer is “no”, or more likely “not yet”. There is still Greek risk, industrial commodities remain weak and although valuations are a lot less demanding, it’s still difficult to find stocks that are “cheap”. However, the technical picture is much improved:
The re-connection with the higher trading zone above 5580 looks unambiguously positive, as is the trading above Wednesday’s high. If we closed today above 5645 the price action would force me into bullish mode.
BUT. The market hasn’t closed yet, and a close below 5580 would be a very bearish development. Note how previous falls through that level has brought slides of 100+ points. As per usual, i’ll wait for the price action to tell me what the market is likely to do in the near future – but it’s a day many traders will watch very closely.
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