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Despite a warm overseas night, SPI futures are suggesting that the ASX200 should jump 33 points this morning to open up new record highs. The ASX200 is showing some classic signs of being a touch too tense and overbought in which it is currently traded. But the trend is certainly on the upside.
Global equities have had a hijacking start in a week that has been dubbed by many as "the largest of the year" for global financial markets. Now the risk of events is well aligned throughout the week, after what was a rather quiet introduction yesterday. The S & P500 slightly moved away from its record highs as US technical titles retraced part of Friday's rally. The Dow Jones was a bit higher, betraying a strong appetite for mega-cap titles. Also European stocks were generally lower for markedly reduced trading activity.
Yesterday Australian stocks beat the largest downturn in Asian financial markets. The first day of the trading week for the Asian region was characterized by a risk off position in view of a five-day event load. The price action on the ASX200 showed the exception to the rule. The benchmark index reached a new 11-year high, closing at less than 20 points compared to the record level recorded in 2007. It was also a day of large-scale gains. All sectors closed higher for the day, with the notable exception of the real estate sector, which fell by about 0.70 percent on a very weak width, also in light of another round of solid auction liquidation rates during the weekend.
The ASX200 is showing some classic signs of being a touch too tense and overbought in which it is currently traded. The returns of the shares remain interesting and the price / earnings ratio is high but within historical norms. But the price-book and price-to-sales ratios have been at their highest for a decade, betraying a market that prospers not necessarily because of exceptional earnings growth prospects, but that benefits from a reduction in interest rates.