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The views expressed in this report are those of Lesley Beath and may differ from Morningstar's views.

Reviewed this week

• Overview
  A sustained topside break unlikely. More...
• Rio Tinto (RIO)
  At resistance. More...
• Fortescue Metals (FMG)
  Waiting for a less-risky entry point. More...
• Boart Longyear (BLY)
  Constructive. More...
• Leighton (LEI)
  Reversal pattern completed. More...
• CFS Retail Property Trust (CFX)
  Risky. More...
• Challenger Infrastructure Fund (CIF)
  Fundamentals and Technicals in alignment. More...

Please note: before making an investment decision, Morningstar recommends you read the fundamental research available on these stocks.

Disclaimer: To the extent that any content in this report constitutes advice, it is general advice that has been prepared by Lesley Beath without taking into account the particular investment objectives, financial situation and particular needs of any individual investors. If necessary, you should consult with a licensed investment adviser or dealer in securities such as a stockbroker before making an investment decision. Opinions expressed herein are subject to change without notice and may differ or be contrary to the opinions or recommendations of Morningstar as a result of using different assumptions and criteria.

Overview

The All Ords advanced by 4% in January - a mediocre performance compared to gains in Greece (+15%), India (+10%), Brazil (+10%), and Germany (+10%). We have even underperformed China, which is ahead by 6%.

If we look at the results since equity markets forged their lows in either September or October last year, the performance in Australia is still disappointing compared to its global peers. European markets such as Germany, Italy, and Spain made their lows in September and have since rallied by 33%, 22%, and 16% respectively. The US, the UK, and Australia made their lows in early October, and have since posted gains of 25%, 19% and 11%. (Note that the All Ords posted its intra-day low for the year on August 9, but the closing low was in conjunction with the October lows in the US).

This lacklustre performance in the domestic market can be partly explained by the performance of the Materials index, which followed the Chinese market lower into late December. Both have edged higher since the beginning of the year and are now in close proximity to the 2011 downtrend. The ASX 100 Resources and the ASX Small Resources broke the corresponding downtrend a few weeks ago, and as noted in mid January, both indices had bounced from a strong area of support in relative-performance terms -this suggested that the resource stocks would outperform the broader market. Since then the ratio of the Materials and the 100 Resources to the All Ords has been relatively steady, but the Small Resources have continued to outperform. At this stage, the outlook remains unchanged, and continued outperformance by resources is anticipated.

(click image to enlarge)

(click image to enlarge)

If both the Materials and the Chinese market can break above resistance then I would expect that the resources will gather upside momentum. What are the odds of that happening?