The stock market will open up this morning at the start of what promises to be an interesting week for traders.
The key market drivers are the Greek debt negotiation, earning reports and ongoing buying momentum. The latter is now being assisted by renewed support for mining and energy stocks.
Stronger European markets on Friday show that markets want to be optimistic about the Greek debt negotiations. This is probably a realistic assessment, although history would suggest that negotiations are unlikely to be finalised until the eleventh hour.
The type of buying momentum that feeds on itself has been the hallmark of recent week’s trading. Potential buyers hoping for better value have been brought off the sidelines by the fear of missing out as prices push relentlessly higher. There are signs that the resource and energy sector is joining the banks in this momentum charge with good gains expected in BHP this morning as investors seek relative value and react to signs that oil prices are bottoming.
The key question for stock traders at the moment is whether or not the impulse rally over recent weeks is going to extend, pushing valuations significantly higher over coming months. The alternative would be something that, in the big picture, looks more like last year’s market action. This saw relatively volatile price action inside a large and gradually rising trading range. The chart of the ASX 200 index has arrived at a potentially key level. Price is yet to move convincingly above trend line resistance across the peaks of the November 2013 and August 2014 highs. A retreat from around current levels would leave the volatile trading range scenario of 2014 largely intact. This week is likely to tell the story of whether or not this resistance is respected.For further comment from Ric Spooner please call 02 8221 2137.