While there was little news to influence investor thinking in international markets on Friday, ongoing support as investors continue to adjust to last week’s FOMC meeting is driving stock markets higher. The potential for higher interest rates in the US now holds fewer fears for investors as they contemplate a scenario in which there are only marginal increases in rates over the next 12 months.
The strength of buying in major domestic yield stocks like CBA on Thursday and Friday suggests the push to higher prices could well have further to play out. This means that one of the market’s landmark levels, 6000 for the ASX 200 index today, is likely to be exceeded for the first time since 2008 today. Another market benchmark in the form of $100 for CBA also looks a distinct possibility in coming weeks.
While the extent of buying in the big banks and other yield stocks like Telstra, is likely to be the key to how far the market rallies today, there should also be a firm start for gold and energy stocks. Both gold and oil are benefitting from $US weakness following the FOMC meeting.
If the ASX 200 index moves clearly past 6000 then 6180 becomes a possibility. At this level, the rally that began in October would be the same size as the rally that took place between mid-2013 and mid-2014. This equivalence in the size of trends is a common feature in markets. There is also potential resistance form old support dating back to 2007 around this level.
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