Eoin Treacy's view A number of Australian subscribers, I met recently, have expressed anxiety with how much pressure the domestic economy is under as a result of a loss of competitiveness exacerbated by the Australian Dollar's persistent strength. Concurrently, many are also concerned that Australia is overly dependent on China's commodity demand, especially since China has been in a tightening cycle for much of the last few years. There is little doubt that China's infrastructure development has a significant bearing on perceptions of how well Australia's economy is likely to perform. It is therefore notable that China's leadership transition has occurred peacefully and that the new administration is committed to promoting growth.

The Deutsche Bank Trade Weighted Australian Dollar Index lost momentum from early last year but has held its progression of higher major reaction lows. It is currently rallying towards the peaks near 150 and while some temporary resistance might be encountered at that level, a clear downward dynamic would be required to check momentum beyond a brief pause.

The S&P/ASX 200 Index found support in the region of the 200-day MA three weeks ago and a sustained move below 4350 would now be required to check potential for continued higher to lateral ranging. The banking sector outperformed the wider market from late last year and is now performing in line. A sustained move below 6300 would be required to question current scope for some additional upside.

The likelihood of more concrete measures to address China's slowing economy continues to mount. This could have a positive effect on sentiment towards Australia's market and the wider economy. I thought it would be an opportune time to look for companies that are exhibiting relative strength by having already broken upwards. To do this I used the Chart Library's High/Low Filter. (Also see Comment of the Day on May 2 nd).

The consumer staples sector shares a high degree of commonality with similar sectors in other regions. It found support in the region of the 200-day MA three weeks ago and is testing the upper side of its short-term range. Wesfarmers (Y6.51%) broke out to new 3-year highs this week and a clear downward dynamic would be required to question medium-term scope for continued upside. In the retail sector Premier Investments (7.85%) rallied to break its two and a half year progression of lower rally highs in September and continues to extend its rebound. While becoming increasingly overbought in the short-term, a clear downward dynamic will be required to check momentum beyond a brief pause.

In the gambling sector Tattersalls (11.03%) found support in the region of the 200-day MA three weeks ago and hit a new three-year high this week. While it could potentially consolidate in this region, a sustained move below the 200-day MA, currently near A$2.70, would be required to question medium-term scope for additional upside.

In the telecoms sector Telstra (9.17%) continues to extend its uptrend but is becoming increasingly overextended in the short term. The first clear downward dynamic is likely to signal a peak of at least short-term and potentially medium-term significance. Singapore Telecommunications (4.61%) is also noteworthy. The share has been consolidating in the region of the upper side of the three-year base and rallied impressively from the region of the 200-day MA last week. A clear downward dynamic would now be required to check potential for additional upside. M2 Telecommunications (6.39%) hit a new all-time high today and a sustained move below the 200-day MA, currently near A$3.50, would be required to question medium-term scope for continued upside.

In the banking sector Commonwealth Bank of Australia (7.84%) hit a new three-year high this week. While there is room for some consolidation in the region of the previous peak near A$60, a sustained move below the 200-day MA would be required to question medium-term scope for continued upside. Bendigo Bank (10.24%) rallied well this week and looks more likely than not to break its medium-term progression of lower rally highs. Macquarie Group (4.45%) has been consolidating mostly above $30 since October and a sustained move above that level would be required to question medium-term scope for continued upside.

In the containers and packaging sector, Brambles (3.86%) has rallied to test the upper side of its more than three-year base and posted a new closing high this week. A clear downward dynamic would be required to check potential for further upside.

The REITs sector was hit particularly hard during the credit crisis but is well represented in the above list. Dexus Property Group (5.22%), Cromwell Property Group (8.31%) and Charter Hall Group (5.6%) all hit new three-year highs this week and continue to extend breakouts from their respective ranges.