Technicals | Jun 13 2017
By Craig Parker, asset manager, Moat Capital
So much for the support at 5730 mentioned last week with the breakout move last Friday turning out to be fake. Right from the get go Monday our market looked to shed its prior weekly gains. Tuesday was the worst day of the week with a 1.5% drop mainly led by the banks and now comes the important 200 day moving average on the S&P/ASX 200. A move below this would indicate some serious weakness. On the flip side, the 200-day moving average could also offer some much-needed support.
From a longer-term perspective when looking at the monthly chart a sideways channel could be forming between the 6000 and 4800 level. Especially if the demise of the 20-year bull cycle of the banks comes to fruition, as some analysts are predicting, then this could become a longer-term outlook. Assuming the upward tending channel was to remain intact, which I think is the more likely scenario over the medium to long term, then the lower levels would be around 5400. On a positive note the daily chart is showing signs of bullish divergence on the RSI however it is not reinforced by any on the weekly and/or monthly charts.
Also, Gold has reached a peak and turned down which can indicate investors have decided to move out of the safe-haven asset and back into risk assets such as equities. On the negative side the S&P 500 MACD indicator looks to be converging and possibly headed for a crossover which wouldn’t be great for our market since it can follow the sentiment of the US market. The S&P 500 also has bearish divergence on the weekly chart and is getting back towards the overbought territory on the monthly chart which isn’t great for the medium-term outlook. In summary, even though we might see a small counter trend back up in the short term, over the medium term I don’t think we have seen the bottom of this recent move down and would be paying close attention to what happens around the 200-day moving average.
ASX200 daily
ASX200 weekly
ASX200 monthly
S&P500 daily
Gold daily
Authorised Representative Sentinel Private Wealth AFSL 344762
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