Technicals | Mar 18 2019
By Craig Parker, asset manager, Moat Capital
So where to now? I’m somewhat glad I was wrong about last week with my prediction of a pullback especially when the prediction means losing money. A week is a very small amount of time in the stock market so I wouldn’t be writing it off just yet. Predicting where the stock market will be in a weeks’ time is more for gamblers than investors. The question we need to ask is the recent pullback over the past week or so including the previous Fridays range a pullback in a newly formed up trend or is it the beginning of a larger move down in the medium term down trend.
To get a better idea we need to look at the charts over different time frames. If you look at the daily chart, then you could argue that we are in an uptrend with higher highs and higher lows and the recent pullback since 8th March is a counter trend in an uptrend. When we look at our weekly chart it is a little less clear with the recent low around 5400 confirming a down trend however a new peak, at least a clear one has not yet formed. And then you look at the Monthly chart and this one adds even more confusion as you could argue we are in a long-term uptrend with the recent movements merely some volatility before moving back into the long-term uptrend.
From a purely technical perspective we are looking good with recent bullish sentiment and the long-term monthly chart also looking good. This is the conundrum with predicting — do you go with the charts as they represent what investors are thinking of the future right now or do you go with your gut. My gut suggests we are in for trouble especially over the medium to long term, considering the FRED yield charts at the bottom are inching lower toward the negative and once they go into negative territory it is only a matter of time before a US recession is called. One could argue locally we are already in one or at least very close to one. Just to add more confusion to the mix the S&P 500 has just poked its head above the shoulder line of an inverse head and shoulders pattern which is a bullish sign. Perhaps we have 6 months left to run in this bull market yet. Enjoy your week!
ASX200 daily
ASX200 weekly
ASX200 monthly
S&P500 weekly
US ten year minus two-year yield
US ten-year minus three-month yield
Authorised Representative Life Plan FP AFSL 449658
Important Information
This message contains privileged and confidential information intended only for the use of the addressee named above. If you are not the intended recipient of the message you are hereby notified that you must not distribute, copy or take action in reliance of the information contained in this message. If you have received this message in error, please notify Life Plan FP immediately. Any views expressed in this message are those of the individual sender, except where the sender specifically states them to be the view of Life Plan FP.
This email message is intended only for the addressee (s) and contains information, which may be confidential. If you are not the intended recipient please do not read, save, forward, disclose, or copy the contents of this email. If this email has been sent to you in error, please delete this email and any copies or links to this email completely and immediately from your system. The information in this email is not to be taken as taxation, investment or personal advice and is only an indication of the views of the writer and cannot be relied upon by the receiver. Should the information be acted upon the receivers are doing so at their own risk. If the receiver requires this advice to be used and acted upon they will require this to be presented on the letterhead of the writer. Life Plan FP have made every reasonable effort to ensure the information provided is correct, but Life Plan FP makes no representation or any warranty as to whether the information is accurate, complete or up to date. To the extent permitted by law, Life Plan FP 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.
FNArena is proud about its track record and past achievements: Ten Years On