Today, Australian investors will not have to go it alone buying stocks as they did for much of last week. Bargain hunters this morning will be supported by the morale boosting encouragement of a 3% turnaround in the German Dax and a 264 point rally in the Dow Jones.
The US earnings season will feature as a key driver for stock market sentiment over coming weeks. Results so far have made it difficult for the US market to sustain its downward momentum, especially against a background of continuing low interest rates. Apple’s results to be released after the close of Monday’s session have the potential to influence sentiment tomorrow. Investors will be focussed on commentary regarding sales of iPhone 6.
Sentiment on the Australian market today will be assisted by the fact that commodity prices held their ground on Friday. Markets are concerned about the possibility that commodities under supply pressure, such as iron ore and oil, might fall further than generally expected. Against this background, any signs that commodity prices may be forming a base around current levels will be a welcome relief.
The question for short term traders is now whether last week’s low was a major bottom or whether we have just embarked on a corrective rally against a deeper decline. From a valuation point of view, with bank dividend yields in the 8-9% range after franking, it’s certainly possible it’s certainly possible to make the case for a major low. Technically more evidence is required. If we are now just correcting the 5680/5122 down trend then potential resistance levels include the 38.25 Fibonacci retracement at 5345 and the 200 day moving average at 5426.
For further comment from Ric Spooner please call 02 8221 2137.