The Aussie market has started the year with some gusto, rising nearly 5 percent from the start of 2012. The US has provided positive leads as their reporting season gets underway, and there’s been an absence of any real surprises out of the eurozone.
Investor sentiment has been boosted by successful eurozone bond auctions, with borrowing costs pulling back despite the recent S&P downgrade of eurozone nations and the EFSF bailout fund. The ECB is reported to be seeking up to $US1 trillion in additional funds to boost financial assistance to the European financial system.
In the US there is talk of QE3 in this presidential election year, and the earnings season has started off well with most companies beating downgraded earnings forecasts.
Commodities have also had a good start to the year with copper outperforming, gaining over 10% for the year. Iron ore and energy stocks have also jumped into 2012.
The Aussie market has once again found support around the 4000 level and appears to be setting up for a retest of the multi-month highs around 4350. Once again we found support around the 4050 level and we’re now trading above the 50 day moving average, which sits around 4150.
The bulls continue to control the market and trading volumes are steadily improving. The calendar year has started off positively, led by the US investors as their earnings season gets going. US financials have had an amazing start to the year with some of the major banking shares up over 20 percent, and even the home builders are joining in this bullish move.
Local investors should be aware that the Chinese market is closed next week for the Lunar New Year and that many of the S&P/ASX sectors are looking to test their 150 day moving averages near term, which could give some pause as these levels have held prices in check for the past six months. The Telecoms and Utilities sectors are in sustained uptrends and the Industrials sector is just breaking into a new uptrend.
The next dividend season begins in February, so you will be well advised to look to options strategies to boost your yields, protect your profits and manage risk. The MDS Financial Advisory Services team can help with this. Call me on 1300 610 024 for further information.
Remain attuned to the news from overseas, particularly from the eurozone and China in relation to easing policies, and the US with their earnings season. Monitor the performance of the US dollar for a guide to the future direction of commodities and equities prices.
The S&P/ASX 200 is up 1.4% so far this week. The index is currently trading at 4218 and is trading above the key pivot level around the 4180. Key levels for the index next week will be 4180 and 4320, with 4230 the key pivot level.
By Michael Hevern
MDS Trading Desk
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