ASX set for a mixed opening as Wall Street slides

May 18, 2021 - 1 month ago
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The Australian share market poised to a mixed start on Tuesday as Wall Street kicks off the week with modest losses, as concerns about inflation continued to unsettle investors.

The yield on the 10-year Treasury has shot higher this year amid the inflation fears. It was at 1.65% late Monday, up from 1.63% at the end of last week. It began the year close to 0.90%.

The ASX futures rose +12 points, or -0.2%, to 7,031, with our local currency, the Australian dollar is currently buying US$0.7770 (as of writing).

At the finishing bell, on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average dipped -54.34 points, or -0.16%, to 34,327.79.

The broad-based Standard & Poor’s 500 Index dropped -10.56 points, or -0.25%, to 4,163.29.

The rich-tech-heavy Nasdaq Composite Index declined -50.93 points, or -0.38%, to 13,379.05.

Apple and Netflix both slid -0.9%, while Microsoft tumbled -1.2%; meanwhile, Tesla dropped more than -2% as famed investor Michael Burry on Monday revealed in a regulatory filing a short position against Tesla worth more than half a billion.

Burry, one of the first investors to call and profit from the subprime mortgage crisis, is long puts against 800,100 shares of Tesla or $534 million by the end of the first quarter, according to the filing with the U.S. Securities and Exchange Commission.

Investors profit from puts when the underlying securities fall in prices. As of March 31, Burry owned 8,001 put contracts, with unknown value, strike price, or expiry, according to the filing.

The tech-heavy Nasdaq Composite, particularly sensitive to inflation fears, dropped -2.3% last week, while the blue-chip Dow slipped -1.1% in that period.

Looking ahead, the Reserve Bank of Australia (RBA) will release minutes from their most recent policy meeting, which could provide further info on the central bank front and the path of monetary policy in Australia.

Overseas, the U.S. Federal Reserve minutes from its last meeting will be released on Wednesday, which could offer some clues on policymakers’ thinking on inflation.

Viewing the S&P/ASX 200 (XJO) daily chart, the Relative Strength Index (RSI) 3-daily ‘lookback’ indicator is struggling to recapture a positive signal as it holds beneath the 50-midway point.

Meanwhile, the Moving Average Convergence Divergence (MACD) supports a negative signal as it remains under the 0.00 axis line.

The Average Directional Movement Index (ADX) trend indicator is neutral and is now ranging.

Developed by J. Welles Wilder, the Relative Strength Index (RSI) is an extremely popular momentum indicator (oscillator) that measures price movements’ speed and change.

RSI oscillates between zero and 100.

According to Wilder (depending on the period setting), the RSI is considered overbought when above 70 and oversold when below 30.

Signals can also be generated by looking for divergences, failure swings and centreline crossovers.

RSI can also be used to identify the general trend.

Gerald Appel developed the (MACD) technical indicator back in 1979, while in 1986, Thomas Aspray added the histogram.

The MACD is a tool used to identify moving averages that indicate a new trend, whether bullish or bearish.

(MACD) plots the distance between moving averages and helps traders identify trend direction and whether the bullish or bearish momentum in the price is strengthening or weakening.

The immediate resistance is seen minor at 7,085, with 7,130-35 resistance above; also note the February 2020 all-time high holds at 7,197.20.

The support is viewed (minor) from 7,030, with 6,965-70 situated beneath. Reassess from there.

Daily outlook on the benchmark S&P/ASX 200

The Australian share market started the week in a mildly positive fashion, although it appears the bullish momentum ran out of steam in the final moments of trade on Monday.

Gains in Information Technology, Energy was offset by Utilities, Telecommunication.

At the closing bell, the benchmark S&P/ASX 200 index eked out a +9.4 points, or +0.13% gain, to 7,023.6, while the broad All Ordinaries index gained +16.4 points or +0.23% to 7,255.8.

Heavyweights BHP Group added +0.06%, to $49.60, Rio Tinto rose +0.49%, to $126.04, while Fortescue Metals Group gained +1.36%, to $23.10.

Gold miners also got their shine back as the precious yellow metal price rally on Friday, with Newcrest rose +2.61% to $28.35, Evolution Mining advanced +5.35%, to $5.12, and Northern Star Resources jumped +6.55%, to $11.22.

In Financials, the Commonwealth Bank lead the “Fab Four” (banks) higher and rose +1.25%, to $97.79.

Meanwhile, National Australia Bank lost -0.65% to $26.05, Australia and New Zealand Banking Group fell -0.4%, and settled at $27.31, with Westpac Banking Corp ended down -0.31%, to $25.33, and Macquarie Group dropped -4.89% and settled at $150.59.

Technology stocks were remained mixed with Buy-now-pay-later giant Afterpay rose +0.13%, to $86.46, accounting software provider Xero surged +5.56%, to $118.75, Altium rose +1.49%, to $24.52, Megaport added +1.59%, to $13.40, NEXTDC gained +1.15%, to $10.57, EML ended flat at $5.15, Zip Co advanced +2.78%, to $7.02 and Nearmap lost -2.87%, to $1.695.

Supermarket giants Coles and Woolworths were weaker, with Coles lost -0.12% to $16.33, while its rival Woolworths fell -0.32% to $40.45.

Carsales.com plunged -11.84% to $17.20 after emerging from a trading halt entered last week while it completed part of a capital raising to pay for the acquisition of US-based Trader Interactive.

Aristocrat Leisure shined to a better-than-expected half-year earnings results would be confirmed next Monday, sending the pokies maker +4.23%, higher to $38.92.

E-commerce group Kogan added +0.49% to $10.17, while Seek fell -1.14% to $28.59.

Meanwhile, JB Hi-Fi climbed +2.55% to $48.47, while Telstra dropped -0.58% to $3.43, with Wesfarmers fell -0.22%, to $54.08, Aristocrat Leisure rose +4.23%, to $38.92 and QBE Insurance tumbled -0.67% to $10.45.

Biotechnology giant CSL slid -0.4%, to $276.57, while ResMed added +0.24%, to $25.25, Fisher & Paykel Healthcare added +2.09%, to $31.32, while Cochlear lost -0.43%, to $215.37 and Mesoblast jumped +6.61%, to $1.855.

Crown Resorts finally responded to U.S. private equity giant Blackstone’s takeover offer, knocking it back by saying even the improved price undervalued the casino giant.

Crown also asked rival Star Entertainment Group to give more detail on its merger proposal to create a $12bn gambling and entertainment behemoth, saying its board had not yet formed a view on the merits of the bid.
Crown shares rose +0.84%, to $13.15 while Star shares added +0.99%, to $4.10.

As for our oil and gas producers, Woodside Petroleum lost -0.27% to $22.52, while Oil Search ended up +0.79%, to $3.85, Santos rose +1%, to $7.08, Beach Energy rose +1.19% to $1.28, and Worley ended flat at $11.45.

Travel stocks were firmer with Sydney Airport rose -1.23%, to $5.77, Corporate Travel Management rose +4.11%, to $18.00, Flight Centre added +1.59%, to $15.32, and Webjet climbed +0.87% to $4.70.

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