Positive mood returns

A healthy start to Friday morning’s market looks assured driven by a number of positive factors.

One is the news of ongoing moderate inflation in the US. This validates the Fed’s cautious attitude to tightening monetary policy making it unlikely that the Fed rate will be much higher than 1.5% by the end of next year. The likelihood of a very modest approach to monetary tightening in the medium term poses few threats to equity valuations at this stage.

Friday's market may also benefit from some rebound effect following Thursday's underperformance by the Australian market. This was possibly related to the expiry of futures and options positions. In that context, traders will be watching for signs of any resumption in the buying in banks and other yield stocks that began earlier in the week.

Despite these positive factors, it’s likely that looming deadlines in the Greek debt crisis will sound a note of caution and cap market exuberance today. Today’s trading looks likely to remain inside yesterday’s range on the ASX 200. From a chart point of view this would leave today’s trading as a neutral, indecisive day but with the short term downtrend intact and the index struggling at the resistance of its 200 day moving average at around 5584.

Gold stocks may be a feature of today’s trading. The precious metal rallied to sit just below its 200n day moving average at $1206 as traders reacted to concerns about Greece combined with the positive impetus of the weaker $US.

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