ASX 200, Weekly Chart, Oct 5.

By Kenneth Robson on October 5, 2012 • ( 0 )

XJO breaks out of 15 month trading range

The Australian share market responded positively to the RBA’s decision to cut interest rates by 0.25% this week, breaking up through a 15 month support resistance level of 4450, to reach a high of 4495.8. It is also possible that the RBA will follow this up with a further similar reduction before the end of the year.

This should boost the level of new home starts, and thus the construction and manufacturing sectors of our economy, a timely stimulus since the resource sector has been faltering with falling commodity prices and the prospect of reduced demand from China.

The next target, if the present market recovery continues, is 4950. With the RSI indicator creeping above 70% into the over-bought zone, it is likely that there will be a pause in trending, or even a pull-back, this coming week.