Has Friday's stock market buying been completed?

The stock market starts a fresh week with a soft lead from international markets and plenty of reason to be cautious as the next milestone for the Greek debt saga draws near and a lot of potentially significant economic data is slated for release.

Sentiment towards the Aussie Dollar is fragile after disappointing data on private capital expenditure this week. Against this background, markets are likely to be sensitive to this morning’s release of local building approvals and business inventories data as well as China’s Manufacturing PMI. Building approvals are a volatile data set prone to lumpy fluctuations approvals for new apartment projects. However, residential building remains one of the key pillars of support for the Australian economy and markets will not want to see any major negative misses.

Friday’s strong rally in the Australian market sets up an interesting dynamic for today’s trading. On the surface of it, weaker US markets appear to have wrong-footed local investors setting up potential for our market to retreat more than expected today. However, the sort of buying momentum seen on Friday often follows through for a while. This creates the possibility that far from being wrong-footed it’s also possible that latent buying for Australian stocks will be triggered again today.

From a technical point of view, Friday’s buying looks to have potential to carry the market higher, if not today then over the course of the coming week. The 61.8% and 78.6% Fibonacci retracement levels index around 5830 and 5900 on the ASX 200 index could be potential targets for a continued rally. The 20 May low and 200 day moving average, on the other hand, provide near term support at around 5575.

For further comment from CMC Markets please call 02 8221 2137.