Eoin Treacy's view Following reviews of US and UK shares on Wednesday and Thursday, I thought it would be instructive to next review the Australian market. I used the Chart Library's High/Low Filter system to identify shares making at least new 3-month highs. Here is a link containing instructions on how to replicate this feat. I then used Bloomberg to identify shares still trading above their respective 200-day MAs.

Australia is blessed with some of the best reserves of indispensable commodities in the world. The last decade has been characterised by a continual swelling in demand for iron-ore, coking and thermal coal, oil, natural gas, gold, copper, cobalt, nickel and agricultural products to name but a few of Australia's export markets. The country's commodity sector is one of the few domestic industries aggressively hiring and investing billions in infrastructure development. On the other hand, the banking, tourism, retail and manufacturing sectors have suffered from the strength of the Australian Dollar and the economic slowdown which following the bust of the global credit bubble in 2008 and massive flooding earlier this year.

The Australian Dollar broke above the psychological US$1 level for the first time since 1982 last November and has been trading mostly above that area since March. It fell below $1.05 in August, rebounded impressively, but has encountered at least short-term supply dominance near S1.07 and the very short-term progression of higher reaction lows is now being challenged. If today's drop back below $1.05 is sustained for more than a day or two, it would increase the potential for an additional deterioration.

The relative strength of the Australian Dollar has weighed on the stock market's performance for much of the last two years. The S&P/ASX 200 Index broke downwards from its 2-year range last month. It rebounded impressively and has been ranging below the 4500 level. A sustained move above that area would be required to suggest demand is returning to medium-term dominance.

The S&P/ASX 300 Resources Index hit a medium-term peak near 6500 in April, fell below the 200-day MA in May and has encountered resistance in the region of the trend mean on successive occasions since. It dropped back to test the 5000 level in August but a sustained move back above the MA would be required to question the consistency of the medium-term downtrend.

The first clear observation from the results of the High/Low Filter is that of the 498 instruments covered only 26 have made at least a new 3-month high in the last five days. 13 are gold mines. All are related to either the mining or oil sectors. That is not to say that all commodity related shares are outperforming. Uranium, platinum and a number of diversified miners are notable for their weakness. Rio Tinto's Australian listing for example posted a new closing 12-month low in the last week.

Gold has been remonetised in the eyes of investors particularly over the last few months. At the Sydney venue for The Chart Seminar in May, delegates expressed doubts that gold in Australian Dollars was a good investment because it had ranged for nearly two years, albeit with an upward bias. This said more about the strength of the Australian Dollar than the weakness of gold. The progression of higher reaction lows remained intact and gold broke successfully upwards in July. It has paused below A$1800 since early August but a sustained move below the 200-day MA, currently near A$1450 would be required to begin to question the consistency of the medium-term uptrend.

Newcrest Mining had been among the leading Australian gold shares but has so far not taken part in the current almost sector-wide advance. Perseus Mining, Silver Lake, Red 5 and Resolute Mining have broken out of relatively lengthy trading ranges and while somewhat overextended in the short-term, sustained moves back below their respective 200-day MAs would be required to question medium-term potential for additional upside. Eldorado Gold broke its 8-month progression of lower rally highs in August and has rallied impressively since. It is now testing the 2010 peak and a sustained move below A$18 would be required to begin to question the consistency of the three-month uptrend. Medusa Mining has also rallied to test its peak. Norton Gold Fields and Catalpa Mining have both broken multi-month progressions of lower rally highs and look more likely than not to continue to advance.

In the energy sector, most coal seam gas drillers are posting new lows. Arrow Energy is an exception because it is subject to a takeover attempt by PetroChina and Shell. Beach Energy has been consolidating in the region of the upper side of its two-year base since April and broke upwards to new recovery highs this week. A sustained move below A$1 would be required to begin to question additional recovery potential. In the uranium sector Extract Resources has held substantially better than other shares and a sustained move below A$6 would be required to question potential for additional upside.

Of the companies not making at least new 3-month highs but still above their respective 200-day MAs, coal miners Aston Resources and New Hope Corp remain in close proximity to their highs and would need to break progressions of rising reaction lows to question scope for some additional upside.

Rare earth miner Alkane Resources found support in the region of its 200-day MA in August and has rebounded to test the five month downtrend. A sustained move above A$2 would improve the chances that it has found medium-term support in the region of A$1.50.

Copper miner, Discovery Metals has been ranging above the 200-day MA since late last year but is currently rallying back towards the early August peak and a sustained move below A$1.20 would be required to question current potential for additional upside.

Wholesaler grocer Metcash yields 9.21% and is rallying from the lower side of a more than two-year range.

Funeral Services provider, Invocare, has been ranging mostly above A$7 and the 2007 peak since late last year. It rebounded well from the August low and a sustained move below A$7 would be required to question potential for additional upside.

Telstra yields 13.16% and has spent the most time above its 200-day MA since 2007. A sustained move below A$2.90 would be required to question current scope for additional higher to lateral ranging.

Private hospital operator Ramsay Healthcare yields 4% and has been consolidating above A$16 since late last year, in a gradual reversion towards the mean. A sustained move below $16 would be required to question the consistency of the medium-term uptrend.

Today's US Dollar rally may weigh on commodity prices and have a knock on effect on commodity shares. Any weakness in the Australian Dollar would be welcomed by Australia's struggling domestic oriented companies.