US indices are extremely resilient and European bourses are not far behind so despite cracks appearing with our latest failure to break out of the range, my assumption is that we're still trending gently higher.
I've added some more to the Aristocrat short at 308 this morning and I've added a long in Alumina at 245 with a stop about 8 cents lower.
If the retracement is complete then I'm looking for Awc to have made a higher low with the likelihood of new highs to come. If there's more of a retracement to come then I'll be stopped out or just take off the trade for about square if the stock pushes along in a range.
Alcoa was up 4% overnight so that provides a guide to sentiment in the sector.
11.01 Karoon is recovering slowly, up 16 to 766. I haven't seen much broker comment but UBS have reiterated their buy signal.
11.28 A friend has just pointed out that the RBA is potentially more worried about wage inflation stemming from rebuilding work in Queensland rather than food price inflation so maybe this CPI number will be quite influential. Mind you, it may still be too early to see the effects.
11.32 The inflation numbers are benign so there's no instant sell off although no rally either.
I notice that National Aust Bank is tipping that this is the year when house prices finally fall significantly. The top end of the market has been under pressure for some time in Sydney. By contrast, Anz Bank's view is only mildly bearish in the short term.
11.48 Lynas continues to chart well and may be coming good after a pennant correction. I bought more stock at 201 and my stop is at 190.
I'm still a fan of Arafura, also in the rare earths sector, because the early January peak looks like a 3rd wave high and the correction is well clear of the breakout from 125.5 in late December. However, the Lynas chart is better because the correction has been so restrained. Nevertheless, I have bought back into this at 141. A stop just below that breakout of 125.5 is too far away so I'll use yesterday's low as the basis for a stop.
After a short delay, the index has responded bullishly to the CPI. The Asx 200 is back through the previous 4816 high, at 4818. It's a stomach churning ride lately; Aussie traders I speak to are looking enviously at clean trending overseas markets.
12.46 The CPI might allow us to finally break out and rally but I'm not holding my breath after numerous failures. I've now gone back to quite a bullish set of positions and I can't say I'm too comfortable but the signals are good and I'm biting the bullet.
1.08 Once again, I'm long Murchison, at 137, having stopped out at 135.5 a few days ago. It can be difficult to jump back into a position but it's the nature of a choppy market. Essentially, the stocks that I like in the short to medium term are much the same. Even Awe is looking good again but that's too far gone for me to buy.
Here's the Mmx chart. The correction has gone on for longer after I thought it was probably over but the stock is holding clearly above breakout levels.
2.06 The market is holding on to a 30 point gain. There's a reasonable chance that the economy is slowing - perhaps on the back of a deteriorating housing market - so that the rebuilding work in Queensland may not be as inflationary as feared. Temporary food price inflation will come through but the authorities are not so concerned about that.
Asian markets are broadly stronger although Shanghai has dropped.
19 of the top 20 stocks (by market cap) are up whereas my watchlist of 27 has 16 gainers, 8 losers and 3 unchanged.
3.11 Just back from a swim and feeling a bit calmer about the market. I was getting stressed because two days ago I was anticipating being able to put on some short positions after a retracement and instead I've bought back my old favourites.
My justification is that I was expecting a very grudging rally if the market was going to be weak for a spell and instead there has been some decent buying. On top of that, the CPI figure gives us a breather, overseas markets continue to be strong and the charts are solid.
Having said all that, the index is tailing off with a public holiday tomorrow and my stocks aren't going anywhere. Lynas had a brief pop up to 205 earlier but hit a wall of selling and is back at 198. It's my biggest position - I think it has the best of the charts right now - and I would love to have seen it follow the North American lead where Molycorp ran 9%.
Here's the 60 minute chart of the Xjo. It could be a lower high forming but for the reasons given above, I'm leaning to the view that there'll be further strength.
4.10 Just sold out quarter of a long position in Ausenco. I've had this for over a month which is quite long term for me. It has been running nicely but has paused for two days so the sale is precautionary.
I also sold out a portion of my Karoon long at 764 in case that's all we're going to see for the dead cat bounce. I got long this at 735 and it quickly ran a dollar as the company announced a successful South American oil well but soon after it was suspended from trading on regulatory delays following which it fell back to earth. Shame, it coulda been a contender.
More on Thursday.
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