ASX trades a 104-point range yesterday as traders try to pick the direction of fear - futures down 21 points

Markets overseas finished lower last night for no particular reason, it seems, other than to cap off what was a volatile month for equity markets. Today's first chart tells the story pretty well, and illustrates the ASX 200 futures market getting an early start on the sell-off to experience an intra-month low that was far more aggressive than that felt in the US. The ASX 200 experienced highs of 5,727.7 and lows of 4,928.3 throughout the month (13.95% peak to trough), while the futures market extended that to a 16.5% range with an almighty low of 4,733 put in just one week ago today. A 16.5% move in a month is a lot for a market to cope with and it leaves behind an opportunity for the bold, and a headache for those who are left deciding whether they have the time and inclination to endure the extreme weather that the market experiences from time to time.

Motorists will have noticed a quick jump in petrol prices over the past few days, today's last chart shows why (although it doesn't explain why petrol stations are so much more vigilant with price changes when oil is its way up than when it is on its way down...). Oil markets have risen sharply over the last week; however, they are coming off long-term lows and remain below the 200 day moving average (red line in chart), which they failed to break as prices rose between March and June this year. I've repeatedly said that the OPEC oil cartel will successfully remove peripheral oil production (smaller producers with higher cost of production) from markets like the US if they can keep prices at around US$50 - the oil price doesn't need to go below US$40 and thus moves below that level will be in the interests of very few. Sounds conspiratorial, but it's just commerce in a largely unregulated global market when it comes to oil.

Traders should expect an as-expected opening this morning; unlike yesterday, US S&P 500 futures have remained where they were when the ASX SPI 200 market closed at 7am this morning. So we're looking at being down around 21 points and although there is only a 6% chance of an RBA rate cut at their 2:30pm announcement today, expect some index and currency volatility around that time.


Source: Rivkin, Saxo Bank

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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3600.

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