Technicals | Jun 28 2010
www.techwizard.com.au
By Rudi Filapek-Vandyck
The TechWizard reports he continues to watch market movements very closely as he sticks to his view that the next few weeks will be key in determining where equity markets are heading in the year ahead.
From a technical perspective, says the Wizard, it is clear Australian share indices are trying to get back above their 20-day moving averages, but it is proving a tough ask.
In addition, about everyone including his/her dog expects indices to carve out a well-defined head-and-shoulders formation on daily price charts. But for this to happen the ASX200 would have to rally to 4800-4900 and only then head down again, offers the Wizard.
Also, other technical experts have pointed out there is no such thing as a head-and-shoulders formation in combination with a still rising 200-day moving average trendline. Towards the end of last week, the S&P 500 in the US fell again below this longer term trendline, but, say these chartists, this does not take away the 200-day moving average is still trending higher.
This would make a successful and confirmed head-and-shoulders formation rather unlikely as such a signal would indicate a reversal in underlying trend.
The TechWizard is not engaging in this head-and-shoulders versus 200 MA debate. He says that if this market remains en route to putting in a new high, his analysis shows the ASX200 is unlikely to reach higher than 5100-5200 (because of strong overhead resistance).
Taking a more negative approach, the Wizard believes that if the ASX200 fails to get back above the 20 MA, a re-test of the 4175 level may well be on the cards. It is his view that if the index closes below this level, the market will start targeting the 2009 lows.
The TechWizard is the pseudonym of Scott Morrison, whose experience in financial markets exceeds twenty years. Morrison operates his own website nowadays at www.techwizard.com.au.
The views expressed above are the TechWizard's, not FNArena's (see our disclaimer).
