Technicals | Jun 22 2012
By Robert Clayton
ASX 200, last at 4002 – Technical analysis is a method of predicting price movements and future market trends by studying charts of past market action and in this case we are dangerously close to the support of 3980.
As the decline continues, the outlook for coming week is to expect lower levels, but of what significance the break of 3980 will give is uncertain. One thing that informs us is the bearish elements that may emerge from a 3980 break. If the bearish pattern is the correct one, then the ASX200 will move out of the recent range of 3980-4150 and head to lows seen late November 2011 at 3650-75. While this level continues to be challenged, technically the outlook will remain vulnerable of eventually being broken.
A drop below 3980 will be an initial sign of weakness and confirm the new decline. A close under 3980 this week will confirm the November 2011 lows to be challenged. However, the structure of the entire decline since the rejection in May 2012 at 4450 may imply a drop to extreme lows of July 2009 around 3100 to 3250.
In summary the ASX200 is vulnerable to the downside as it continues to struggle to break above 4150. The overnight’s weakness of the S&P500 displaying a similar move warns that the break of the ASX 200 support at 3980 appears immediate. However, the result of a rejection would see this continuation of ranging 3980 to 4150. To reinstate a temporary bull trend would need a break of the 4150 key resistance. This would give a measured swing to 4300 to 4380.
The first graph below provides a daily view and the second a weekly view.
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Rob Clayton – Senior Technical Analyst – has been providing technical analysis on Foreign Exchange, Futures, and Interest Rate products for the past 21 years. He held many senior analyst roles including the role of Senior Technical Analyst at Westpac Institutional Bank for 12 of those years. Rob is now part of the investments team at GTL Capital Management. Rob’s daily reports are read by institutional and professional clients in Australia, Asia, Europe and the Middle East.
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