BHP fuels ASX 200 surge

A surge in production from miner BHP Billiton — shipping 223 million tonnes in FY 2014 against earlier projections of 207 million tonnes — helped the ASX 200 break through resistance at 5550/5560 today. Expect retracement to test support at 5550 and the rising trendline. Respect would confirm a medium-term target of 5700*.

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX below 10 continues to indicate a bull market.

The Australian Dollar responded to the influx of international buyers, breaking resistance at $0.94. Follow-through above $0.945 would confirm a rally to $0.97. RBA intervention has so far proved ineffectual, but reversal below $0.94 would warn of a test of $0.92.

Aussie retraces as ASX 200 strengthens

RBA concern over the rising Australian Dollar is increasing, but whether this will motivate governor Glenn Stevens to do more than attempt to talk the market lower remains to be seen. The Aussie retraced to test its new support level, but only a fall below $0.92 would suggest a trend change. Recovery above $0.94 would suggest not, while follow-through above $0.95 would confirm a target of $0.97.

The ASX 200 broke clear of its descending trendline, suggesting that the correction is over. But 21-day Twiggs Money Flow remains weak and follow-through above 5540/5560 unlikely. Further ranging between 5400 and 5550 seems likely. Reversal below 5380 is now unlikely, but would warn of a test of 5300.

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX again tracked lower, indicating a bull market.

ASX 200 weakens but Aussie dollar strengthens

• Aussie dollar strengthens.
• Stocks weaken.
• But ASX 200 VIX continues to indicate a bull market.

The Aussie Dollar is testing resistance at $0.94. Consolidation in a narrow band suggests continuation of the rally towards $0.97/$0.98. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend, but we may see the RBA intervene to prevent this. They may need to follow the RBNZ, introducing macro-prudential controls (e.g. setting a maximum 80% LVR percentage), to take the steam out of the housing market while lowering interest rates to weaken the currency.

The ASX 200 respected resistance at 5500 and is headed for a test of medium-term support at 5400. Reversal of 21-day Twiggs Money Flow below zero warns of medium-term selling pressure and a correction. Breach of 5400 is likely and would test support at 5300 and the rising trendline. Respect of 5400 is unlikely, but would suggest another rally to 5550.

* Target calculation: 5550 + ( 5550 – 5400 ) = 5700

ASX 200 VIX below 12, however, continues to indicate low risk typical of a bull market.

Aussie strong despite ASX

The ASX 200 broke its rising trendline and short-term support to signal a correction. Declining 21-day Twiggs Money Flow indicates short-term selling pressure (a trough that respects zero would be a bullish sign). Breach of 5290/5300 would warn of a test of primary support at 5050. Failure of primary support is unlikely, but would signal a down-trend. Recovery above 5460 is also unlikely at present, but would signal a fresh advance.

* Target calculation: 5450 + ( 5450 – 5300 ) = 5600

ASX 200 VIX is rising, but continues to indicate low risk typical of a bull market.

The Aussie Dollar remains strong, consolidating at $0.94 despite ASX weakness. Bullish divergence on 13-week Twiggs Momentum signals a primary up-trend, but we may see the RBA intervene to prevent this. The RBA may need to follow the RBNZ, with macro-prudential controls, to take the steam out of the housing market (setting a maximum LVR percentage, for example) if further rate cuts become necessary.

* Target calculation: 0.93 + ( 0.93 – 0.91 ) = 0.95

Who is buying Australian stocks?

Despite a broad sell-off across global markets, the ASX 200 has stood firm, rallying into the close for the last two days. Low volumes indicate an absence of sellers, but expect strong resistance at 5450/5460. Breach of the rising trendline would warn of another test of support at 5300 and possibly a stronger correction. Breakout above 5450/5460 remains as likely and would signal an advance to 5600*. Primary support at 5050 does not at this stage appear threatened and the index remains in an up-trend.

* Target calculation: 5450 + ( 5450 – 5300 ) = 5600

A rising Aussie Dollar may be contributing to ASX resilience. Performance over the last quarter looks a lot stronger if measured in US Dollars or Japanese Yen. Breakout of the Aussie Dollar above $0.93 suggests a rally to $0.95*.

* Target calculation: 0.93 + ( 0.93 – 0.91 ) = 0.95

The weekly chart presents a more complete picture. Breach of the descending trendline and recovery of 13-week Twiggs Momentum above zero (after a strong bullish divergence) both suggest that a bottom is forming, but we are a long way from commencing an up-trend.

Aussie Dollar resilient despite ASX correction

China is dragging the ASX lower despite a resilient US market. Breach of medium-term support at 5340 warns of a correction. Declining 21-day Twiggs Money Flow indicates selling pressure and reversal below zero would strengthen the signal. The primary trend remains upward, however, and only breach of support at 5050 would signal a reversal.

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

ASX 200 VIX retreated to 13, indicating low risk typical of a bull market.

The Aussie Dollar is also proving resilient, testing resistance at $0.91 and the descending trendline despite weakness on the ASX. Upward breakout would suggest the down-trend is weakening. Recovery of 13-week Twiggs Momentum above zero would go further, signaling a primary up-trend, though only breakout above $0.97 would confirm. Reversal below medium-term support at $0.89 remains more likely, however, and would warn of another decline. Breach of primary support at $0.87 would offer a target of $0.83*.

* Target calculation: 0.87 – ( 0.91 – 0.87 ) = 0.83

ASX and Aussie Dollar retreat

The Aussie Dollar retreated from resistance at $0.91 and is likely to test medium-term support at $0.89. Breach of support would test the primary level at $0.87, while respect would favor another attempt at $0.91. The primary trend is down and failure of primary support would offer a target of $0.83*.

* Target calculation: 0.87 – ( 0.91 – 0.87 ) = 0.83

The ASX 200 followed the Aussie lower, retreating below 5450 on the daily chart. Retreat of 21-day Twiggs Money Flow below zero would complete a bearish divergence, warning of a correction. Failure of support at 5350 would confirm. The primary trend remains upward and only breach of support at 5050 would signal a reversal.

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

ASX 200 VIX below 15 continues to indicate low risk typical of a bull market.

ASX 200 stalls as Aussie Dollar retreats

The Aussie Dollar retreated from resistance at $0.91. Breakout below primary support at $0.885 against the greenback would warn of a primary decline, with a long-term target of $0.81*. Follow-through below $0.865 would confirm. Recent Twiggs Momentum peaks below zero also indicate a primary down-trend. Respect of primary support and recovery above $0.91 is unlikely, but would suggest that a bottom is forming.

* Target calculation: 0.89 – ( 0.97 – 0.89 ) = 0.81

The ASX 200 is consolidating below resistance at 5450, waiting for a lead from US markets. Bearish divergence on 13-week Twiggs Money Flow suggests long-term selling pressure, but completion of a large trough above zero (TMF recovery above 30%) would change this. Breakout above 5450 would signal an advance to 5800*. Reversal below 5400, however, would warn of another correction.

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

ASX 200 VIX below 15 indicates low risk typical of a bull market.

Aussie dive hurts ASX

The Australian Dollar is declining after breaking primary support at $0.885, offering a long-term target of 80 cents*. Exporters and import replacement industries on the ASX will benefit from the weaker Aussie Dollar in the long-term, but the short-term impact is negative, with overseas investors retreating from the market.

* Target calculation: 0.885 – ( 0.97 – 0.885 ) = 0.80

The ASX 200 is heading for a test of support at 5200. Breach is likely and would signal a test of primary support at 5000. Declining 13-week Twiggs Money Flow indicates selling pressure. Recovery above 5400 is unlikely in the short-term, but would signal a primary advance, with a long-term target of 5800*.

* Target calculation: 5400 + ( 5400 – 5000 ) = 5800

Australia: ASX 200

A monthly chart of the ASX 200 shows how the index tends to peak ahead of the CRB Commodities Index and Australian Dollar but then fall in step with them from there on. The ASX 200 was first to reverse direction in 2011 but commodities now lead the way. Expect Australian stocks — and the Aussie Dollar — to follow commodities lower. Breach of primary support at 3850 would offer a target of 3200*.

* Target calculation: 3800 – ( 4400 – 3800 ) = 3200

On the daily chart, breach of support at 3980/4000 would signal a test of primary support at 3850. Reversal of 21-day Twiggs Money Flow below zero, warning of medium-term selling pressure, increases the likelihood of a downward breakout.

* Target calculation: 4000 – ( 4150 – 4000 ) = 3850

Aussie Dollar, Canadian Loonie and commodities

The CRB Commodities Index retreated from resistance at 325. Failure of medium-term support at 310 would signal a test of primary support at 295. Respect of the zero line (from below) by 63-day Twiggs Momentum indicates continuation of the primary down-trend.

Lower commodity prices weakened the Aussie Dollar, with a fall below $1.06 warning of a correction to the long-term (green) rising trendline. 63-Day Twiggs Momentum remains strong, however, and recovery above $1.08 would confirm a primary up-trend.

Canada’s Loonie was helped by rising crude prices and recovery above $1.01 would confirm the primary advance to $1.06*.

* Target calculation: 1.01 + ( 1.01 – 0.96 ) = 1.06

Aussie dollar strengthens

The Aussie dollar recovered above parity, breach of the declining trendline indicating that the correction is over. Breakout of the CRB Commodities Index above 325 would be a bullish sign, suggesting another test of $1.08 against the greenback. Breakout above $1.08 remains unlikely, but would offer a long-term target of 1.20*.

* Target calculation: 1.08 + ( 1.08 – 0.96 ) = 1.20

Commodities drag Aussie and Canadian dollar lower

Commodities are weakening and dragging the Aussie and Loonie lower. The Aussie dollar shows a similar iceberg pattern on 63-day Twiggs Momentum, warning of a primary down-trend. Breakout below primary support at $0.94 would offer a long-term target of $0.80*.

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

Canada’s Loonie is also headed for a test of $0.94 against the greenback. The peak below zero on 63-day Twiggs Momentum indicates a strong down-trend. Failure of primary support (0.94) would offer a target of $0.87*.

* Target calculation: 0.94 – ( 1.01 – 0.94 ) = 0.87

Aussie and Loonie test support

The Aussie is testing support at parity against the greenback. The “iceberg” on 63-day Twiggs Momentum indicates a primary down-trend. Failure of parity would test primary support at $0.94 and, in the long-term, breach of primary support would signal a decline to $0.80*.

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

63-Day Twiggs Momentum indicates a stronger down-trend on Canada’s Loonie. Failure of support at $0.975 would test primary support at $0.94 and, in the long-term, breach of the $0.94 level would signal decline to $0.80*.

* Target calculation: 0.94 – ( 1.01 – 0.94 ) = 0.87

The Aussie and Loonie normally move in sympathy with the CRB Commodities Index and a CRB break of its primary down-trend would warn of a reversal on the above two currencies.

Aussie and Loonie hurt by dollar surge

The Aussie broke short-term support at $1.02, signaling a test of parity. The descending 63-day Twiggs Momentum “iceberg” warns of a primary down-trend. Breach of parity would indicate another visit to primary support at $0.94. In the long-term, failure of primary support would offer a target of $0.80*.

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

Canada’s Loonie “peeked” briefly above parity before retreating to test support at $0.975/0.980. Descending 63-day Twiggs Momentum, below zero, indicates a primary down-trend. Breach of support would test $0.94; and failure of primary support at $0.94 would offer a target of $0.88*.

* Target calculation: 0.94 – ( 1.00 – 0.94 ) = 0.88

Aussie Dollar

The Aussie Dollar is headed for a test of support at $1.01/$1.00. Recovery above $1.08 would complete an inverted head and shoulders, but there is still some way to go.  Breach of support would warn of another primary decline. In the long-term, failure of support at $0.94 would offer a target of $0.80, while breakout above $1.08 would indicate a target of $1.22.

* Target calculation: 0.94 – ( 1.08 – 0.94 ) = 0.80

Forex: Euro and the Aussie dollar strengthen

The euro is testing resistance at the former support level of $1.40, in the hope that the bailout out-lined today will rescue the euro-zone from its debt crisis. We will probably read fairly disparate views over the next few weeks before the varying viewpoints synthesize into a clear market direction. Reversal below $1.365 would warn of a decline to $.20*, while narrow consolidation below the resistance level would suggest a breakout and advance to the 2011 highs.

* Target calculation: 1.30 – ( 1.40 – 1.30 ) = 1.20

The Pound similarly rallied to $1.60. Respect would re-test primary support at $1.53, while breakout would target $1.67.

* Target calculation: 1.53 – ( 1.60 – 1.53 ) = 1.46

The dollar broke support at ¥76, continuing its long-term (mega) down-trend against the Yen.  Target for the breakout is ¥72*.

* Target calculation: 76 – ( 80 – 76 ) = 72

The Aussie benefited from the weaker greenback, recovering above $1.04 to signal an attempt at $1.08*. Penetration of the descending trendline indicates that the down-trend is weakening.

* Target calculation: 1.04 + ( 1.04 – 1.00 ) = 1.08

The Aussie and Loonie both closely follow commodity prices. Respect of the upper trend channel on the CRB Index would warn of another down-swing.

Canda’s Loonie is testing resistance at $1.00 against the greenback. Reversal below $0.975 would warn of another down-swing, while breakout above parity would target $1.02*.

* Target calculation: 1.00 + ( 1.00 – 0.98 ) = 1.02

The Aussie dollar completed a double bottom against its Kiwi counterpart (probably due to lost man-hours after celebrating their Rugby World Cup win). Expect a test of $1.32* followed by retracement to confirm support at $1.28.

* Target calculation: 1.28 + ( 1.28 – 1.24 ) = 1.32

The South Africans went home early (from the RWC) and a descending triangle on the USDZAR warns of  downward breakout to test support at $7.20.

* Target calculation: 7.80 – ( 8.40 – 7.80 ) = 7.20

Aussie Dollar down-trend

Another monthly chart — this time of the Aussie dollar against the greenback. The decline of the last 3 months found support at $0.94 before rallying to a high of $1.04. Breach of the rising trendline indicates that the primary up-trend has ended; confirmed by bearish divergence on 63-day Twiggs Momentum and reversal below zero. Failure of support at $0.94 would signal a decline to $0.84.

* Target calculation: 0.94 – ( 1.04 – 0.94 ) = 0.84

The daily chart shows consolidation between $1.01 and $1.04 over the last week. Failure of support at $1.01 is likely and would warn of a decline to $0.94. Breakout above $1.04 and the descending trendline is unlikely, but would indicate a rally to the July high of $1.10.