Originally published by Rivkin Securities
US stock markets drifted slightly lower overnight as oil continued its slide with the S&P 500 and Dow Jones Industrial Average down 0.06% and 0.27% respectively. There is a risk that the rapid fall in oil prices will lead to lower inflation and derail the Federal Reserves’ (Fed) plans to continue hiking interest rates although recent commentary by various Fed officials suggests that it is determined to stick to its current rate trajectory.
The ASX was sold off quite savagely yesterday without any real catalyst. The S&P/ASX 200 fell 1.6% with energy, financials and materials hit particularly hard. The index is now negative for the year to date (YTD) and is not far off its YTD lows. With such a rapid sell-off it is often possible to find stocks that become relatively oversold and are ripe for a short-term bounce. The table below shows some ASX 200 stocks that are currently heavily oversold based on their low two period Relative Strength Index (RSI) values. We have also included some overbought stocks based on the same RSI indicator.
Relative Strength Index (RSI) values for selected ASX 200 stocks.
The Rio Tinto Ltd (AX:RIO) share price has been falling for the past month and is not far from its YTD lows. The low value of the RSI may indicate that it is oversold in the short term, however that does not mean the medium or long-term trend is not still down. The opposite is true for ResMed Inc (NYSE:RMD), which may be overbought in the short term.
ASX 200 futures are pointing to a higher open this morning, which is perhaps not surprising given that yesterday’s sell-off was not confirmed by international stock markets. This morning the Reserve Bank of New Zealand kept interest rates on hold at 1.75%. There are no significant scheduled news releases for the rest of the day.
Data releases:
- No Significant Data