Morning Report Thursday 16 October 2014
The US washout approaches completion as the Dow plunges over 450 points but then recovers over 1/2 of the losses.
We continue to be surrounded by negativity, as the investors juggle thoughts on slowing global growth, the timing of rising interest rates in the US and a second case of Ebola in Texas. But remember, decent buying opportunities require people to be nervous. The equity markets are following the script we have been discussing recently, with the ASX200 leading the recovery closing 2.4% above recent lows yesterday, while the US large cap indices continued to fall. At the end of a torrid session last night, the Dow closed down 173 points, but the Russell 2000 (small cap Index) was up 1.28%, a bullish indicator to me with the index that led the decline is now leading the recovery. I remain comfortable with my recent view that the ASX200 will recover from the 5100 area, to at least the 5350-5400 area and any current weakness should be bought - today may be the last opportunity. The US Indices may still have further to fall in the larger picture, but I still believe this remains a correction to buy and nothing more sinister. When I look at the individual sectors of the local market the story is very different with CBA positioned to rally 2-3% minimum but BHP still ultimately targeting the $31 which is over 5% lower. Overall the yield now being offered by the local market should be very supportive as things calm with real interest rates on deposits basically zero.
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