ASX 200 Continues to Consolidate

• The Australian Index continues to tread water.  

• Little to no macroeconomic announcements for the next 48 hours.  

• Australia will almost certainly take its lead from New York.  

It was a quiet Monday for the ASX 200, as the index continues to tread water just below the 8,300 level. This is a market that is waiting to get its cues from larger offshore markets, and it’s probably worth noting that there isn’t much in the way of fundamental analysis from a macroeconomic standpoint to move the markets for the next day or two.   

Because of this, it will probably be a market that continues to focus on what happens in the commodity markets, as well as New York. After all, Wall Street does tend to move the rest of the markets over the longer term, and the volatility that we have seen over the last couple of sessions on Wall Street suggests that there are still plenty of buyers out there, but we also had seen the market get a little overstretched after the election last week. Because of this, it’s very likely that Australian equities traders remain a little bit flustered.  

Commonwealth Bank of Australia (CBA)  

The Commonwealth Bank of Australia gained 0.32% for the day and is up just under 10% for the last month. While gaining just AU$0.47 for the day doesn’t sound like much, the reality is that the market had tested the AU$150 level, which in and of itself will carry a little bit of psychology into the market. Ultimately, CBA is a little stretched, but quite frankly it’s obvious that buyers continue to look at CBA with favour. This will be especially true if we start to see growth in Asia, as CBA is quite often the financier of larger projects, not only in Australia, but beyond its shores.  

REA Group (REA)  

REA Group, the communication services giant in Australia, rallied better than 2% for the session, gaining just under AU$5 in a strong move. The market is now upon the recent swing high and could break above the crucial AU$240 level if momentum holds. Regardless, REA has been in a strong uptrend for 5 or 6 weeks, with no signs of momentum slowing. At this point, it’s probably worth noting that although there is a dividend of AU$1.02, quite frankly this seems to be more about “FOMO trading” than anything else. The sellers have all but disappeared at this point in time.  

Santos Ltd (STO)  

Santos continues to look miserable, dropping 0.88% for the session, despite the fact that it is only AU$0.06. In other words, the market has fallen so far that the slightest move only tends to exaggerate the losses. With a dividend of AU$0.191, some traders might be keen to try to take advantage of the dividend play, but quite frankly this is a very dangerous stock at the moment, as the energy company has seen brutal losses.  

Sooner or later, this will probably become a major value trade, but we have not seen significant volume or momentum enter the market to suggest that we are at the bottom yet. While some longer-term “buy-and-hold” traders might be interested, the average retail trader will almost certainly shy away from a market that seemingly cannot find a floor.  

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