Thursday, 3 November 2011

ASX 200 priced in US dollars, compared to S&P 500

We Aussies are financially joined at the hip with the US. We're not the only ones. The global financial system floats atop a sea of US dollar liquidity, which moves up and down not due to any imagined lever pulling by the Fed, other central banks, or governments, but due to fluctuating sentiment among investors and traders.

The first chart plots prices on the first day of each month from August 2007 through to October 2011.

The second plots prices each trading day from the beginning of 2011 through to October 31. The ASX 200 looks to be leading the way down, as it did in 2008.

ASX 200 set to open higher

After hours trading is currently at 4221, up from Wednesday's ASX close of 4185. The market is once again testing the down trend line drawn from the April high. A turn lower from nearby current levels would suggest that last week's upside trend line break was both false and complete.