Today is Monday in the second full week in January, typically the day when workplaces around Australia start to fill up again although the kids are still off school and a lot of folk will be taking holidays in the next few weeks. I was hoping for some more activity but volumes remain light and I'm twiddling my thumbs as well as getting rid of a few long positions which haven't performed after the market retraced some solid gains from last week.
The new year hasn't changed the prevailing mood of pessimism and the market seems ripe for a rally on a technical basis. The first signs were a couple of very strong days last week which have since retraced, though not completely. A higher low would be quite bullish and the market could start to follow US and European indices. It's by no means certain, of course, and the weaker Asian indices are providing the template at the moment.
Here's the Asx 200 daily chart which shows that the market has done little of note since an unusually quiet holiday season began in mid December.
However, what interests me is the slow retracement of the 350 point bounce from late November/early December and then the breaking of that downtrend last week after a higher low. It implies another leg up which might once again test the breakdown levels just below 4500 from the middle of last year.
There's no catalyst as yet although extreme pessimism could be one along with divergence from the better performing world markets. For example, look at the move in the S&P 500 since mid December.
It's a similar story for the FTSE.
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