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ASX Charts Review: S&P/ASX 200, All Ords Index, CBA, GOLD & TLS

April 8th, 2013 · Greg Atkinson · 37 Comments

The Australian stock market appears poised to head lower this week and there are signs that the rally which started in the middle of 2012, is turning into a decent sized correction. Over the next week or so the key areas to watch will be the mining stocks, banking stocks and gold prices. But already if we look at some charts in these areas we can see a trend developing.

The first trend that is developing is a fairly broad-based stock market correction which we can see in the 3 month candlestick chart of the S&P/ASX 200 Index below.

S&P/ASX 200 Index 3 month candlestick chart


Towards the end of February the rally started to come under pressure but it regained ground into March only to give up these gains plus some. We are now getting close to a support level around 4800 which I expect to be tested soon.

To see what is dragging the S&P/ASX 200 (XJO) down, let’s have a look at the stock price charts for Commonwealth Bank and BHP Billiton since the ASX 200 is basically moved by banking and mining stocks.

BHP Billiton vs Commonwealth Bank 1 year chart


A few aspects of the chart above are worth pointing out. Firstly we can see how CBA and BHP shares trended upwards from mid-2012 until fairly recently, as did most mining and banking stocks within the ASX 200.

But in February the mining stocks started to come under pressure for reasons such as the continuing economic saga in the EU and some questions about the economic numbers coming out of China..which I personally always question. Thus the fall in the mining stocks started to put the ASX 200 Index under pressure, however for a while the bank stocks kept heading upwards which limited any falls.

However once the banking stocks started slipping back (which we can see reflected by the CBA stock price above) then there was only one place for the ASX 200 to go…and that was down. This downwards trend will continue as long as the bank & mining/resources shares keep slipping backwards.

If we now look at the 3 month candlestick chart for CBA shares we can see clearly how the fall in the stock price developed.

 Commonwealth Bank (ASX:CBA) 3 month stock price chart


This chart suggests to me that the overall market has further to fall because I expect the banking stocks to slip back some more. Why? Simply because I see no reason for them to keep heading higher since by my reckoning, they are now in the over-bought range. As for the mining stocks, well I turned bearish on them a while back and believe they will remain under pressure for the rest of this year at least.

Next I will look at gold prices in Australian dollar terms using the chart for the Exchange Trade Fund ETF:GOLD.

ASX ETF:GOLD vs All Ordinaries Index 1 year chart


The chart above shows ETF:GOLD versus the ASX All Ords Index and clearly gold has not done well this year compared to stocks. However over the short term we may see gold do better than stocks if the stock market correction we are seeing drags on for a few weeks.

Over the last two years, ETF:GOLD has also done very little while over the same period the Telstra (ASX:TLS) stock price for example has risen about 60%. (see chart below) This illustrates that even when the stock market is struggling, the right stocks can provide investors with healthy returns.  Of course picking the right stocks is a challenge and that is easier said than done!

ETF:GOLD vs Telstra (ASX:GOLD) 2 year chart


So over the next few weeks I expect the market to drift lower, but during this time some buying opportunities will arise. At this stage my own strategy is to just sit back and see how the correction plays out for now. I will review this stance if the 4800 support level is broken and the market enters what I judge to be the over-sold range again.

Greg Atkinson is the editor of Shareswatch Australia and Managing Director of Ohori Capital. He currently works & resides in Japan.
He can be followed on twitter via

37 responses so far ↓

  • 1 Stillgotshoeson // Apr 8, 2013 at 8:17 pm

    The big 6 have so much weighting on the market that if they fall any half decent amount they will mask any companies that are performing well on the market unless you are watching them.

    Interesting times are upon us again.

  • 2 Greg Atkinson // Apr 9, 2013 at 9:32 am

    Yes that’s a good point. I see the ASX 200 is putting up a fight to get back to 5000 today but I still reckon this correction has further to run.

  • 3 Biker // Apr 9, 2013 at 4:43 pm

    C’mon, ASX!

    Doncha love anthropomorphism? 😉

  • 4 Lachlan // Apr 9, 2013 at 5:23 pm

    Dunno BP. The ASX might be feeling confused frightened and a little insecure right here 😉

  • 5 Biker // Apr 9, 2013 at 6:19 pm

    Nothing a little government intervention can’t remedy, Lachlan!~ 😀 😀 😀

  • 6 Greg Atkinson // Apr 10, 2013 at 9:02 am

    The trade numbers out of China today will probably give the market a kick up or down so that will be interesting.

    The other thing we need to take into account is how the ASX All Ords/ASX 200 looks to international fund managers etc.

    In other words would they buy into the Australian stock market where gains are uncertain when they could get into the S&P 500 for example where QE will give stocks a boost? (or the Nikkei 225 even)

  • 7 Greg Atkinson // Apr 10, 2013 at 5:16 pm

    Well the trade numbers from China are out and as usual there are questions regarding their accuracy. From Bloomberg today:

    “China’s exports rose less than forecast for the first time in four months, fueling concerns about the outlook for trade and the quality of the data as the government said some companies file false customs declarations.

    Shipments abroad increased 10 percent in March from a year earlier, the customs administration said today in Beijing, while imports rose by an above-forecast 14.1 percent, leaving an unexpected trade deficit of $880 million. An “astounding” 92.9 percent jump in exports to Hong Kong, the most in 18 years, raises questions on data quality, researcher IHS Inc. said.”

    Source: China Exports Miss Forecasts as ‘Absurd’ Data Defended: Economy

  • 8 Lachlan // Apr 11, 2013 at 5:12 pm

    The boom in Aussie mining jobs still looks strong in the chart on this link Greg. I am hoping the current mining malaise will lift very shortly. The tables dating back decades are good showing areas across Aus.
    I wont discount the fact that mining booms do bust sometime. Looking loosely at global macro trends, population forecasts etc i am not sure this is about to blow up though.

  • 9 Biker // Apr 12, 2013 at 9:27 am

    Hunt Bros revisited, Lachlan?

  • 10 Greg Atkinson // Apr 12, 2013 at 4:03 pm

    Well the All Ords & ASX 200 both ended the week above 5000 which goes to prove once again that I should avoid making short term calls. But from a long term investment point of view I see no reason to rush back into stocks just yet.

  • 11 Lachlan // Apr 12, 2013 at 5:37 pm

    Good fun watching the fireworks BP. The BCers if they are genuine are doing a good thing by doing something for themselves but imo they brought a knife to an automatic weapons fight. What with the popular monopoly reproducing trillions of spendable units in just months. I won’t be wasting my dough on the BC’s.

    Greg have not looked at the ASX200 but thought a deeper correction say into the 4400/4600 area would be on the cards as you know. As long as our buck is absorbing hits from the foreign printers without too much return fire then I cannot see that the compression in prices wont remain ie slow progress on the upside but probably limited downside too at these levels bar a systemic implosion worldwide. As far as I am concerned I am happy that we are restraining from too much loosening here…but i know it can’t last forever either.

  • 12 Biker // Apr 12, 2013 at 6:02 pm

    I’m probably more bullish on China than most here, Lachlan. I recognise that Greg’s BDI figures are relevant, but our frequent recent trips through South East Asia have been a real eye-opener.

    One amazing change we’ve noticed over the last decade has been the tremendous increase in EVs, virtually all of them Chinese. We saw tens of thousands of electric bicycles, for example… and quite a few different electric motor cycles in common use. What surprised us was the difference in price of EVs in Asia and Australia. I’ve no idea of the tax implications involved, but Aussies appear to be paying over 300% more for identical products.
    I imagine Matthew would have a better understanding of the issues… .

    If I wasn’t so happily retired, I’d look into importing EVs as a business opportunity… . 🙂

  • 13 Greg Atkinson // Apr 12, 2013 at 8:22 pm

    Lachlan the IMF has recently downgraded their global growth forecast (again) and most of the large mining CEO’s sound a lot more cautious now than they did a year or do ago. Asia (ex China/Japan) will continue to grow of course, as it has for decades, but it is going to be pretty hard to post solid growth numbers on a global level with the EU in the doldrums, the US struggling and possibly the economy in China slowing again this year.

    A deeper correction as you suggest would almost be a certainty if we saw a series of bad numbers out of China. As I mentioned a while back a warning sign that has been flagged is Chinese steel inventories which appear quite high.

    Anyway once we get further clear of the Chinese lunar new year we should start to hopefully see some numbers which will indicate a trend. Until then, as they say, it could go anyway.

  • 14 Greg Atkinson // Apr 15, 2013 at 3:05 pm

    P.S. ASX ETF:GOLD down more than 6% today. Gold also now below $1500 USD/ounce which makes it closer to $1000 than $2000 an ounce by the way.

  • 15 Biker // Apr 15, 2013 at 3:47 pm

    Will a _third_ portfolio emerge here, I wonder? 😉

  • 16 Lachlan // Apr 15, 2013 at 7:08 pm

    AUD gold will hit 1300 imo…it’s at 1347 now. I promise you though fella’s I ain’t sweating although I did not think 2 years ago this was the more likely scenario. Anyhow those stops were a large part of the problem and they’re gone now. A lot of paper died on Friday. Meanwhile China has bought a massive amount of real stuff Greg. One exchange alone has taken 400T in the last 6 weeks. Lets welcome our new overlords 😉

  • 17 Greg Atkinson // Apr 15, 2013 at 7:40 pm

    Lachlan it’s too wild out there for me to make any calls regarding gold now. As you know I have been a gold bear for quite some time but Ben at the Fed has been doing his best to nullify my planning up until now and he might just pull another rabbit (QE Mk ?) out of hit hat.

    Iron ore, copper and a few other resources also tumbled today which they would not be doing if investors were confident about global growth and the outlook for China.

    Anyway I just had a look at gold prices now..currently down -6.65% to 1,401.50 USD/ounce. Next stop?

  • 18 Biker // Apr 15, 2013 at 7:50 pm

    If we drop back to cost-of-production, AU will be hæmorrhaging. One consolation for very long-term investors may be the ease with which old portfolios disappear into-the-ether… and bright, shiny new ones appear!~

  • 19 Greg Atkinson // Apr 24, 2013 at 6:28 pm

    Jim Chanos is one investor I pay a lot of attention to and his view regarding China is one of the reasons I am very cautious about the outlook for the economy there.

    So for me this article was a very interesting read: JIM CHANOS: These Bizarre Cartoons Prove That Even China Is Worried About Its Fate

    It may also help to explain why I am not in a particularly bullish frame of mind regarding the Australian stock market as well.

  • 20 Ned S // Apr 25, 2013 at 12:02 pm

    Chanos: He sure is a bear on China alright.

    “what’s happened more recently after the new party leaders took in, was another burst of investment. but more importantly, another burst of credit expansion. and what really has us concerned now, you have credit actually accelerating in china. but gdp growth still slowing. in the last quarter, china pronounceded some staggering numbers a couple weeks ago. new credit outstanding jumped by $1 trillion u.s. now this is an $8 trillion u.s. economy. so on an annualized rate, that’s 50% gdp. new credit creation. and to put that also in perspective, total new credit globally went up by $1.5 trillion in the first quarter. china is $1 trillion of that, yet only 10% of the world economy. so there is a credit bubble that’s actually not only huge, but getting bigger”

  • 21 Greg Atkinson // Apr 29, 2013 at 4:04 pm

    Ned the China PMI survey is out on Wednesday and if this is weak then I expect the mining stocks to fall further and take the ASX 200 down with is.

    Personally I think Chanos is right on the money regarding China.

  • 22 Lachlan // Apr 30, 2013 at 12:08 pm

    Greg it looks to me like the banks (and a couple other sectors) are going to push higher and the index with it and the divergence with mining to continue. Maybe a good time to take the other side of that trade soon….maybe near tax time. Can the XJO go up another few hundred points here? I think it will. Hot dollars.

  • 23 Lachlan // Apr 30, 2013 at 1:30 pm

    Actually I would never short a bank… well unless you are a Reggie Middleton or some such. I commented to Sayce when he recommended shorting them some time back….at least I made the point they were technically bullish. Regardless of what you think of them its a risky practice. Who knows… where the new money goes? Safer to hold a physical asset.

  • 24 Greg Atkinson // Apr 30, 2013 at 8:51 pm

    The banks are getting a little pricey for my liking Lachlan. Maybe a little too much money out there chasing yield alone?

  • 25 Lachlan // May 1, 2013 at 6:10 am

    Greg at least now the market offers a clear discount opportunity which is illuminated by contrasting higher prices in banking health etc. At least we are getting somewhere now with fair price dips becoming available for buyers. Its not to say miners can’t go lower or banks can’t go higher however there is a price disparity now to work with.

  • 26 Greg Atkinson // May 8, 2013 at 6:03 am

    That is true Lachlan. I am a bit of a contrarian so I went bearish on mining stocks a while back when it seemed to many that the mining boom would never end and now I am cautious regarding the banks but warming back up to some of the big diversified miners.

  • 27 Biker // May 8, 2013 at 6:34 am

    GA: “I am cautious regarding the banks…”

    No-one could have failed to note the alacrity with which three of the Big Four passed on the full rate cut this time. Sign of strength… or hungry for more mortgage business in a slowing business / residential construction phase?

    Mike Smith cited compelling figures recently, to demonstrate his claim that our banks are ‘the best in the world’. It may be a little soon to write off our banks… .

  • 28 Greg Atkinson // May 8, 2013 at 7:45 am

    Biker being cautions on a sector or stock does not equal a “write-off”. If you look at the key statistics for CBA shares for example they are now in the zone which I would suggest means the stock is fairly valued as opposed to being a undervalued bargain.

    Can the bank stocks go higher…sure. But that doesn’t make them any better value in terms of long term investing.

  • 29 Biker // May 8, 2013 at 8:18 am

    Yes, it was unfair to imply that _you_ were ‘writing our banks off’.

    The comment was directed at extremist punters, those who predicted bank failure for 2012*

    * Along with a string of other disasters… .

  • 30 Stillgotshoeson // May 9, 2013 at 6:59 am

    Unexpected for some…

    “After a powerful recovery through the autumn and winter from a V-shaped downturn last summer, China’s economy is unexpectedly faltering once again. Exports are weak. _The country’s domestic economy is still growing mostly because of huge increases in lending by state-controlled banks and a surge in off-balance sheet lending._ Consumer spending is rising, but not fast enough to offset weakness in other sectors.”

  • 31 Greg Atkinson // May 9, 2013 at 9:19 am

    The Chinese trade numbers out yesterday were right out of a Monty Python sketch. According to the “official” data imports & exports both grew strongly.

    Meanwhile on planet earth China’s biggest export market, the EU, is struggling..export growth to the US was sluggish at best and exports to Japan fell. Also exports to Taiwan and South Korea also fell as far as I can tell.

    Yet amazingly not only did export growth chug along nicely according to the Chinese numbers crunchers, it also exceeded forecasts! Hooray for the wonders of a command economy! 😉

    Meanwhile back in Australia the stock market took the Chinese numbers hook, line and sinker.

  • 32 Lachlan // May 9, 2013 at 10:04 am

    Marc Faber looked at Chinas trade with other nations who have their own numbers and suggested the China numbers were over done and I don’t doubt him either. My only point I am making on China is that it likely has a better time in front of it than say a PIIGS nation or the US. The things that extinguish debt are labour and resources (including gold) and China has done well there. But yes it has the usual debt based currency and economy which will recede here and there…ie boom and bust. These other places by contrast have a fully over leveraged population and little to back it up.
    To be fair, China do have overcapacity for now and a lot of people to keep happy. There could be problems there but anyone here better qualified to comment should inform me.

  • 33 Lachlan // May 9, 2013 at 10:06 am

    There are people I know who have travelled to China who make a big deal of the social tension thing. But that’s just their take.

  • 34 Greg Atkinson // Jun 5, 2013 at 11:07 am

    I doubt growth in China is anywhere near 7%..maybe 4% at best and close to zero if you strip out overbuilding.

    Anyway today the All Ords & ASX 200 is heading towards 4800..again. You can almost set you watch by the market corrections and mini-rallies these days.

  • 35 Biker // Jun 5, 2013 at 12:08 pm

    “I doubt growth in China is anywhere near 7%..maybe 4% at best…”

    Crikey! Where did I just read that?

  • 36 Greg Atkinson // Jun 5, 2013 at 1:41 pm

    Not sure..but I have been saying growth in China would slow since last year and have often questioned the reliability of the official numbers.

  • 37 Biker // Jun 5, 2013 at 1:58 pm

    Those exact figures rang a bell. Thought it must be deja vu all over again… .

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