On the brink
Falling US share prices overnight could not have come at a worse time for the Australian share market, at least from a technical point of view. After a failed attempt to rise through 6,000, the Australia 200 index finished yesterday finely poised just above the key 5,900 support level. The likely opening downdraft today will see it crack the level, potential sparking technical selling and a day of underperformance for local shares.
US share dropped despite a positive read on the services and non-manufacturing sectors of the economy. A fall against the news flow is a sign of underlying weakness. With the reporting season out of the way, the February rally that took US shares to all-time highs is looking tired, and there may be a corrective sell off that flushes the market.
One possible bright spot for the session is the energy sector. Oil prices responded positively to the stronger US data, potentially adding to interest in oil and gas stocks evidenced by the sector’s outperformance yesterday.
Traders are watching the Australian dollar closely. The relationship between the currency and the index has strengthened, and any falls in the AUD could bring further market support as traders anticipate international buying
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.
Frequently Asked Questions about this Article…
US share prices fell even with positive news from the services and non-manufacturing sectors, indicating underlying market weakness. This suggests that the recent rally might be losing steam, potentially leading to a corrective sell-off.
The drop in US shares could negatively impact the Australian share market, especially since the Australia 200 index is hovering just above a key support level. A further decline might trigger technical selling and underperformance in local shares.
The 5,900 support level is crucial for the Australia 200 index. If the index falls below this level, it could lead to increased technical selling and a potential downturn in the market.
Yes, the energy sector might offer a bright spot for investors. Recent positive movements in oil prices, driven by strong US economic data, could boost interest in oil and gas stocks, as evidenced by the sector's recent outperformance.
The performance of the Australian dollar is closely linked to the share market. A decline in the AUD could attract international buyers, providing support to the market.
Traders should keep an eye on the relationship between the Australian dollar and the share market index. Any significant movements in the currency could influence market dynamics and investor behavior.
The February rally in US shares is seen as 'tired' because, despite reaching all-time highs, the market is showing signs of fatigue and vulnerability to a corrective sell-off.
For more detailed commentary on the market situation, you can contact Michael McCarthy at CMC Markets by calling 02 8221 2135.
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