Morning Report Tuesday 13 May 2014
Overseas markets show their hand: how about Australia?
Yesterday, the ASX200 again fell over 50 points from the morning highs, as sellers of strength continue to dominate the domestic market. This trend has been established over the last threw weeks as the US stocks continue to close at all-time highs. This is exactly the same pattern that emerged in 2013 prior to an -11.8% fall in the ASX200; the ASX200 had a choppy May struggling to break clear of 5,200, gaining a maximum of only 2.7%, while the S&P powered up to 6.7% 1,687 - see circles on charts 1 & 2. I have not changed my view that a decent correction is approaching fast, BUT the NASDAQ / German Dax will ideally reach fresh 2014 highs prior to a 10% correction. I have actually become even more comfortable with this view as I am hearing a number of people in the trading room this morning saying "this year is different, there will be no May / June correction". I remain very comfortable holding 75% in cash.
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