Resource sector the key today

10.00 AEDT, Tuesday 11 December 2012

Resource sector the key today
By Ric Spooner (Chief Market Analyst, CMC Markets)

There is no obvious reason why today should be the day for the S&P/ASX 200 index to rally to test key technical resistance at 4582. If it is to happen resources could lead the way.

Although international markets were firm overnight, the current rally is showing signs of fatigue as investors wait for more clarity on the US fiscal cliff negotiations before adding to risk positions. In what looks like being a relatively quiet news day, the most likely scenario today is for local markets to follow their overseas counterparts sticking reasonably close to yesterday’s levels in subdued volumes.

The risk to this scenario could be to the upside with the resource sector leading the way. If we are to have one of those days where the index rises to test resistance despite an obvious news catalyst, a strong resource sector could be the reason. There has been considerable momentum behind the recent rally in both iron ore and copper prices. The iron ore index broke past recent highs yesterday to settle at $123.40. This was reflected in the major miners with Rio and BHP both having strong days yesterday. If continued today, the recent strong upward momentum in China’s stock market may also be a key factor for local investor sentiment.

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