The CFD Trading Report - Evening 17 May 2012

Short extract from this evening's SPI and CFD Trading Report for the Australian-based CFD Trader.

CFD Trading ... The Aussie sharemarket gyrated in a moderately volatile trading band in contrast to the consistent and stable performances of bourse in the Asians region and the US Dow Jones Index Futures (+50). Whilst most Asian sharemarkets displayed a consistent, albeit cautious recovery throughout the session, the local market raced ahead at the opening only to tip over on arbitrage selling once more mid morning, before further advances in the Nikkei and Shanghai bourse drew buying by fund managers in the afternoon that took the ASX 200 back to above the neutral line. However, another bout of selling took the market back into the red with the SPI closing beneath its fair value. Technically further downside over the short term is most likely with the present downside momentum to at least the target point we highlighted last night.

• What worries us is that the US DJI Index pullback has in fact been quite contained in the broader context and if more severe losses unfold, it could lead to us to test the Sep-Oct 2011 lows before long.

Local financials continued to weigh up the implications of uncertainty in Europe, coupled with the talk over an expected escalation of the initial estimate size of JP Morgan’s trading loss, now seen closer to $3bn. Whilst the domestic majors do not have any direct exposures to the troubled region, the falls in share price of their international peers, does have a relative valuation impact locally on the sector as a whole. Interestingly ANZ and NAB, which outperformed with near flat performances, but sizeable falls were noted in Westpac and Commonwealth Bank, suggesting quite a lot of reshuffling occurring presently amongst fund managers. The latter appeared to be caught up a “buy the rumour, sell fact” reaction after its Trading Update provided few insights into what appears to be a stunning result.

We find it worthy to touch upon gold tonight.

Unlike last year in which the yellow metal managed to benefit from the uncertainty stemming from instability in the Euro zone, the recent escalation of woes in Greece and Spain has not only done little to attract fresh defensive flows of money, but instead have triggered losses as investors/traders liquidate longs to pay for margins elsewhere or otherwise park money into the greenback. Technically the price did reach the key horizontal support region yesterday and showed mild bouncing signs in Asia today. However, we are wary over the present slowing physical demand especially from China and India.

• Hence in our opinion bottom fishing into the likes of Newcrest Mining and Kingsgate Consolidated might be a little early for our liking. (See our blog today on Capitulation)

FTSE Commentary: The FTSE is currently entrenched with a mild down sloping channel. Having taken out the previous up-sloping support line, the market confirmed a downward bias. The additional clearance beneath the 200-day MA line heightens focus to the downside. However, the SI is presently suggesting oversold and bouncing. It is all about the EZ for now and developments in the periphery. Its growth prospects will be stifled by uncertainty in the region. The overnight Bank of England Inflation Report was clearly softer than expected. This provides a mixed tone for equities as at least they will more likely receive further stimulus in the form of quant easing once more.