The Correction Begins Now, Wizard Says

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By Rudi Filapek-Vandyck

The TechWizard believes this week might be the start of a new leg down for equities, confirming the view he expressed in March that April was likely to see an intermediate top.

The Wizard has observed that today's broad based weakness has pushed price action below the 20 moving average (M/A) and it certainly looks like the Australian share market will close below the 20 M/A by the close of today's trading session.

He points out a daily close below the 20 M/A in the past two occasions has each time been followed up by more selling and deeper falls. Adding to his bearish view is the fact that US shares (or at least the Dow Jones Industrial Average) have been pushing for new highs while Australian shares are rather weak.

To add even more to his bearish view is the fact that his favourite indicator, the MACD indicator, has turned into negative territory as well. The fast line of the indicator has now fallen below the zero-line and that is not a positive signal, he points out.

Also, points out the Wizard, it is rather rare for an index to record four attempts in succession to move beyond overhead resistance. We now had three unsuccessful attempts, he says while asking rhetorically: is it time for that long awaited correction?

Technical support for the ASX200 index is located at 4800 and 4500.

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