Daytrading Feb 2 afternoon

  1. 8,460 Posts.
    Thanks Brit and morning regulars.

    Half-time round-up:

    Shares defied weak leads from Wall Street, soft Chinese factory data and a retreat in oil to rally for an eighth session as investors bet the Reserve Bank will cut the cash rate tomorrow.

    At lunchtime the ASX 200 was 49 points or 0.9% ahead at 5637 as the bounce from the January low extended beyond 350 points. The rally was spearheaded by resource stocks, including gold +2.9%, energy +1.7% and metals & mining +1.4%. Telecoms was the only sector to lose ground, falling 0.4%.

    The rally over the last two weeks reflects the near certainty that the Reserve Bank will cut its key rate tomorrow, according to Bell Potter's Charlie Aitken. However, the benefits of the cut are now fully priced in, he claimed.

    "I am of the view a 25bp rate cut on Tuesday afternoon is a certainty," he told Fairfax. " I also believe it is 100% priced in to the AUD [dollar], AGB’s [government bonds] and yield sectors of the ASX. I expect no dramatic price reaction to confirmation of the rate cut, the only dramatic price reaction would come if I am proved wrong and the RBA stands pat."

    Asian markets flashed red after data showed China's manufacturing activity contracted more than expected last month. The final version of HSBC's manufacturing PMI declined to 49.7 from a preliminary reading of 49.8. China's Shanghai Composite was lately down 2.06%, Hong Kong's Hang Seng 0.46% and Japan's Nikkei 0.56%. Dow futures were recently up 36 points or 0.2%.

    Crude oil futures cents pared Friday's 8.3% rally, falling $1.41 or 2.9% this morning to US$46.82 a barrel. Spot gold was $2.60 weaker at US$1,280.50 an ounce. The dollar was buying 77.85 US cents.

    Been a heck of a rally over the last two weeks. However, the risk now appears to be tilted to the downside with the danger that the market has misread the RBA. Eight-session rallies are pretty rare, so there does not look to be a lot of upside even if the Reserve Bank cuts. Trading: the saving grace of this line of work is that when things look grim you are only one good trade away from salvation. Took a proper spanking on TGS on Friday but undid most of the damage with CNX this morning. The difference was that the CNX sell-off appeared to be mostly retail, so the selling dried up much faster than in TGS. Also got a pip out of GTG - expected more but I guess there are too many traders sitting on profits there.
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