Australia 200 for Monday, May 4, 2015
After making another solid run at the key 6000 level earlier last week but again being forced back by overwhelming supply at that level, the Australian 200 index dropped sharply to move through the 5800 level down to a two month low below 5750, before rallying well to finish out last week. The index will now be hoping for the long term support level around 5800 to kick in and continue to prop it up. Several weeks ago the Australian 200 index showed some positive signs and moved well towards the resistance at 6000 before finishing the week strongly lower. It now looks poised again to test the key 6000 level and if this level is broken, it is reasonable to expect a large shift towards bullish sentiment and potentially the index could really take off – it seems as if everyone is just waiting for it to happen. Several weeks ago the Australia 200 index pushed higher to a multi-year high to just above the key resistance level at 6000, before easing lower throughout the last couple of weeks to below 5900. It is receiving ongoing support at 5800, which is helping its latest push towards 6000. The key 6000 level remains firm and a significant obstacle and the index and markets are firmly fixed on it.
Back in mid-March the ASX200 index found some support at the key 5800 level which has propped it up and allowed it to rally a little and move higher, and of course it will be hoping to receive the same again. Back in early March the ASX200 index reversed from its highs near 6000 and started to establish a new medium term down trend before rallying higher a couple of weeks ago. It enjoyed a strong move higher throughout February moving from below the key 5800 level up to another multi-year high near 6000, where it met stiff resistance. At the beginning of February it spent a week or so battling with resistance at the key 5800 level which repeatedly fended off the index, resulting in it easing back a little. This level has resumed its key role and is currently having an impact on the index.
Throughout the second half of January the Australian 200 index did very well and surged higher to move back above the key 5400 level and push on through to the new highs. At this time, the resistance at 5500 stood tall and fended off all advances, however this now been broken strongly through. Throughout most of November and December, the Australia 200 Index fell steadily lower down towards support around 5150 and two month lows before rallying back above 5400 again. Over the last few weeks the Australia 200 index has struggled with resistance at 5400 which has forced it lower time and time again. The 5400 level has been a major player for the last 12 months and the index must get back above this level to encourage more buying and bullish sentiment.
The Australian sharemarket should enjoy a positive start to the week before investors’ attention turns to an expected interest rate cut by the Reserve Bank. Stocks will likely open higher on Monday following a sharp rise on the US market on Friday, with the Dow Jones Industrial Average gaining more than one per cent or 183.54 points to 18,024.06. All eyes will be on the Reserve Bank of Australia board meeting on Tuesday, with 12 of the 15 economists surveyed by AAP expecting the RBA to cut the cash rate to a new record low of two per cent. Economists predict it will be a finely-balanced decision. “The case for another cut remains strong: the outlook for business investment remains weak, commodity prices are softer than expected, the Australian dollar remains too high and is at risk of rebounding further and inflation is benign,” AMP Capital chief economist Shane Oliver said. “However, the RBA may continue to fret about housing leverage and Sydney home price gains, and the bounce in the iron ore price over the last few weeks has eased the pressure on the RBA a bit. “So while our base case is for a cut, another month on hold would not be surprising.”
Australia 200 May 4 at 00:35 GMT 5835 H: 5839 L: 5750
Australia 200 Technical
| S3 | S2 | S1 | R1 | R2 | R3 |
| 5650 | 5400 | 5150 | 6000 | — | — |
During the hours of the Asian trading session on Monday, the Australia 200 Index will be looking to make another run at the long term resistance level at 6000 after finishing last week so strongly.
Further levels in both directions:
• Below: 5800, 5650, and 5400.
• Above: 6000.
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- 00:30 AU TD-MI Infl ation Gauge (Apr)
- 01:30 AU ANZ Job Ads (Apr)
- 01:30 AU Building approvals (Mar)
- 08:00 EU Manufacturing PMI (Apr)
- 08:30 EU Sentix Indicator (May)
- 14:00 US Factory Orders (Mar)