No bounce overnight, but no deepening of sell-off either - ASX futures up 43 points

Futures traders overnight reversed some of the pessimism that gripped the Aussie market yesterday, with a relatively large gain of 43 points (0.8%) versus a gain of 0.12% on the US S&P 500 index. Despite what will be a better start today, Rivkin's Global Investment Director Oliver Gordon sees the probably continuation of the current down-trend to a zone between 4,700-4,800. That doesn't mean it will happen, but yesterday's close of 4,918 was convincingly below the 5,000 level that we had been keeping the door open to a break higher. With the break out of the consolidation pattern being lower rather than higher, short-sellers will likely use 5,000 as the new 'top' of the range, whereas up until yesterday it was the bottom of the recent range. This means that traders will feel more comfortable to place aggressive short trades (i.e., sell equities with the view of buying them back lower at a profit) with the view that if the market rises to the 5,000 level, there will be plenty of sellers to absorb their buy orders and allow them to close out their short positions with limited risk.

In the context of the 1,000+ falls we've seen on the ASX 200 since April, I don't think investors should be too worried about the potential of a next stop down at the 4,700-4,800 zone. Why? Well,  for one it's only a technical probability at this stage, and further to that it's only another 140 points from here - if I were a long-term investor (and I am) I'd be inclined to buy the current weakness (and I am) rather than hold out and attempt to pick the bottom (there's an crude old saying about the good that picking bottoms will do for you, but I'll leave it out in case you're having breakfast). For this reason, I'm super comfortable with tomorrow's release of the Rivkin Local October Blue Chip Strategy. What a great time to buy some beaten down blue chips with high dividend yields. Phone 1300 748 546 if you don't have access to Rivkin Local, where the strategy release will take place.

Today's second chart shows the Aussie dollar (AUDUSD), which, despite our equity market making fresh daily closing lows yesterday, hasn't dipped below the low put in on 7 September. Traders in FX markets will use this major low, which was $0.6893, to trade above and if it support holds above 69c, then traders might be inclined to take out long positions until new lows suggest that the medium-term down-trend is still in place.

The last chart today is a follow-up from yesterday, with Glencore clawing back GBP 11.50 or 13.3%. 13% sounds like a lot, but in the context of recent falls it amounts to little more than a dead-cat bounce (more crude finance idioms - sorry, I do love cats and have no interest in knowing how high then bounce once they've passed), so I don't think listed resource companies in Australia are in for anything like a reversal of yesterday's falls.


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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