Saturday, 6 October 2012

ASX 200 has a strong week but is lagging S&P 500 since QE Infinity announcement

The ASX 200 this week pushed to new highs for 2012.  Taken at face value, the following chart suggests that a run toward the next resistance level around 5000 is now on the cards, a target echoed by my post on Wednesday about the apparent Cup and Handle pattern. That said, the fresh 2012 high for the ASX 200 is a glaring divergence from the US S&P 500, which remains below its September high. The ASX 200 is unlikely to power higher unless the S&P 500 does so too.

Given the apparent strength of the ASX 200 this week, I was curious to know how it has performed relative to the S&P 500 since the QE Infinity announcement.

To be fairly compared they must of course both be measured in the same currency, with the obvious choice being the USD.

At 2am AEST on September 14, shortly before QE Infinity was announced, the ASX 200 was priced in after hours trade at 4348 AUD or 4543 USD. The ASX 200 closed after hours trading this week at 4489 AUD or 4573 USD, for a move higher of 0.66% in US dollar terms since just before QE Infinity.

Doing the same calculation for the S&P 500, at 2am AEST on September 14 it was trading at 1438 (USD of course), and closed this week's after hours trade at 1461, for a move higher of 1.60% in US dollar terms.

So while the ASX 200 is up strongly in Aussie dollar terms, the global investor holding USDs is seeing it lag the S&P 500. Up only 0.66% compared to 1.60%.

To me this is interesting both in its own right and as a warning that the Aussie market is perhaps not as strong as this week's headline numbers would suggest. Keep half an eye on the USA. And another half an eye on China, where markets reopen on Monday after a one week holiday. Will China play catch up to the Western rally, or throw a spanner in the works? We'll have to wait and see.

S&P 500 yet to break clear of trend channel

AUD/USD forming a triangle beginning mid 2011?

Til a couple of weeks ago I was focussed on the AUD/USD's near term bullish potential, which did not turn out to be a winning idea. Win some, lose some. What's next? The chart shows my best guess. The market may work its way lower toward a test of the triangle's lower trend line.

EUR/USD still in down trend that began in mid 2011

Gold flirting with resistance

I might be reading too much in to Twitter chatter, but there seemed to be a greater than usual degree of bullish sentiment expressed about Gold this week, not only by yours truly. Such a degree of bullish emotion combined with price being immediately below key resistance may not be immediately bullish for prices. Most market participants who are bullish have already bought, so are there enough buyers on the sidelines to push Gold higher in the near term? A push through $1800 will answer in the affirmative, but first perhaps it may be time for a correction of the recent run up?

Silver flirting with resistance

Like it or not, Silver needs to beat nearby resistance at the late 2011 and early 2012 highs before anyone should get too carried away with its bullish potential.

Avid Investor model portfolio summary for trading week ending 5 October 2012

No new positions were added since Wednesday evening's update, and no stops changed. I have tweaked the layout of spreadsheet, fixed a bug, and also tweaked the wording of the rules slightly so that (hopefully) they read better.

This post and site do not offer trading or investment advice. Please read full disclaimer.