Technicals | Dec 19 2016
By Craig Parker, asset manager, Moat Capital
What a flat week it was even with the US rates decision. Our market is now deciding whether 5600 is the peak we had to have. A retracement down between the 5300 and 5400 levels would be ideal from a technical trend perspective before launching an assault towards a new peak around the 5700 level. If this were the case, then our market would first need to break the new resistance level of 5600.
The negatives for our market from a short term technical perspective is some bearish divergence on the daily chart and the moving averages sending mixed messages on the weekly chart. They are not significant however, some additional important indicators for our market are the Iron Ore and Volatility charts. Iron Ore has some significant bearish divergence on the daily chart (shown below) indicating a possible short term correction. This could affect our market via the materials sector albeit only slightly, unless it flows into the financials’ sector.
The other issue is the volatility index which is very low and due for a correction up which, generally means a turn down for the market. Also, the S&P 500 has had a very steep run up and we all know that the steeper the run the greater the risk of a steeper correction. A bit like a rubber band, the further it stretches the greater the pain when its let go, as my 2 year old discovered recently. Hopefully the S&P 500 can manage some sort of short term correction to consolidate before heading higher.
On a positive note for the medium term our monthly chart is still in an uptrend even if it comes off around the 5300/5400 level. Technically this would be a very good buying opportunity if the channel support line remained intact.
S&P/ASX 200 – Daily
S&P/ASX 200 – Weekly
S&P/ASX 200 – Monthly
Iron Ore
Authorised Representative Sentinel Private Wealth AFSL 344762
Important Information
This document and its contents are general in nature and do not constitute or convey personal advice. It has been prepared without consideration of anyone's particular financial situation, needs or financial objectives. Personal advice should be sought before acting on any of the areas discussed. The authors and distributors of this document accept no liability for any loss or damage suffered by any person as a result of that person, or any other person, placing any reliance on the contents of this document.
Moat Capital has made every reasonable effort to ensure the information provided is correct, but Moat Capital makes no representation or any warranty as to whether the information is accurate, complete or up to date. To the extent permitted by law, Moat Capital accepts no responsibility for any errors or misstatements, negligent or otherwise. The information provided may be based on assumptions or market conditions and may change without notice.
Reprinted with permission of the publisher. Content included in this article is not by association the view of FNArena (see our disclaimer).
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
