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Stock Charts Review: ASX All Ords, CBA, PPT, AGK, GMI & GOLD.

March 4th, 2012 · Greg Atkinson · 2 Comments

So far this year the Australian stock market had managed to edge slowly upwards and the All Ordinaries Index appears poised to settle above 4400 during the next week or so. Although the risks of a major Eurozone economic implosion appear to be fading, the signs are that the economy in China continues to slow and it appears the U.S. economy is still struggling. The situation in China in particular is likely to have a major impact on where the Australian stock market heads next over the following few months.

Since falling below 4000 late last year the All Ordinaries Index has managed to creep back upwards despite some volatile dips in November & December. This year,  stock market trading has been less volatile and as we can see from the chart below, 2012 has been a good one for the stock market so far.

ASX All Ordinaries (XAO) Index 6 Month Chart


I have drawn a crude trend line on the chart above simply to highlight how the All Ords Index has move upwards since the falls below 4000  last year. But we should also note that the market is still below where it was in late October 2011. So yes the market has moved positively in 2012, but if we look back over 6 months its actually still below the level it reached in October 2011.

If we look at a few listed stocks then this might help us understand what has been happening. Firstly let’s have a look at one of the big four banks – the Commonwealth Bank of Australia. (ASX:CBA)

Commonwealth Bank (ASX:CBA) 6 Month Stock Price Chart


The CBA share price this year has been in pretty much of a holding pattern and this suggests to me that there is still plenty of concern around regarding the outlook for the Australian & global economies.

Like the All Ords, the CBA chart shows that since late October its stock price has basically gone nowhere and what essentially has happened is the stock has simply recovered from being oversold.

Another stock in the financial area that I believe is worth following is Perpetual Trustees (PPT) because its a company outside of the traditional banking sector and also because it is fairly diversified in terms of the financial services and products it offers.

Perpetual Trustees (ASX:PPT) 6 Month Stock Price Chart


All I would like to say about the PPT chart is that again it highlights that although many stocks have rallied this year, most are simply getting back to where they were 6 months ago.  Some may see this as a sign the market is entering a bullish phase however I don’t.  I simply see it as a sign that stocks were oversold and that many are now getting back up to levels which are still below their 52 week highs. (or in other words, nothing to get excited about)

But some stocks have actually fallen back while the wider market has been rallying. AGL Energy (ASX:AGK) shares for example are at the bottom of their six month range although I suspect the carbon tax is putting the brakes on share price gains for many companies, as would be fears that economic growth in Australia may slow this year.

AGL Energy (ASX:AGK) 6 Month Stock Price Chart


Another stock that is not showing a clear trend upwards this year is the Listed Investment Company (LIC) Global Mining Investments. (ASX:GMI)

Global Mining Investments (ASX:GMI) 6 Month Stock Price Chart


GMI is an interesting LIC to watch since it is essentially a basket of global resource related stocks and therefore gives us some indication of what the global demand is for resources is, as opposed to what the demand is just for Australian resources or ASX listed resource related stocks.

Although GMI shares did start the year strongly, when I look at the chart  above I get the impression that the rally in its share price has run out of steam and that the demand for commodities is not quite as strong as the commodities bulls would lead us to believe.

This is one stock that will basically rise or fall on news coming out of China and as readers will know, I expect we will see stocks like GMI take a hit this year once it becomes clear the Chinese economy will struggle to expand. (although “amazingly” official growth will be close to whatever the central government aims for.  Command economies are funny like that)

Finally I just wanted to post a chart of  ETF GOLD over the last 6 months as it is a good indication of what gold is doing in Australian Dollar (AUD) terms.

ETF GOLD (ASX:GOLD) 6 Month Price Chart


I am bearish on gold at the moment (and have been for a while) so I don’t want to say too much about the chart above expect to state the obvious which is that the 6 month trend is downwards.  Personally I think gold is the wrong play for investors using AUD this year, but plenty of others will disagree  and can put forward good reasons why gold is still a good investment.

In summary my reading of the market (or attempt at reading the tea leaves) is that stocks are pretty much trading without direction and that the movement of the ASX All Ordinaries back towards 4400 is simply due to the market coming back from an oversold position.  I still expect a fall back towards 4000 or below when investors focus on China again, but I still think that once that is out of the way we should see the market make a run toward 5000 later this year.

Greg Atkinson is the editor of Shareswatch Australia and the Managing Director of Ohori Capital He is originally from Australia but currently resides in Japan. He can be followed on twitter via @GregAtkinson_jp

2 responses so far ↓

  • 1 Trading Coach // Mar 5, 2012 at 12:37 pm

    Thanks for this update. As always, it has been an interesting and informative point of view.

  • 2 Greg Atkinson // Mar 6, 2012 at 9:34 am

    Well stocks are edging down again on the news that China has lowered its growth target. (which should hardly be a surprise to anyone)

    The miners will lead the declines & I doubt that this will be the last we hear about the Chinese economy slowing.

    Amusingly much of the press is saying that the Chinese authorities have tapped on the brakes which is rubbish…the brakes are being applied in Europe and there is not much they can do about it.

    I wouldn’t be surprised if the growth forecast is lowered again later this year. The reason given will probably be along the lines of moving towards a more sustainable economy blah blah…

    It will also be very interesting to see what spin Gillard & Swan put on this. I suspect this will be their get out of jail card when they find they can’t balance the books.

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