Technicals | Oct 16 2013
By Greg Peel
A notable aspect of charting is that while one picture may seem clear on a particular timeframe, if the camera is pulled back a very different picture can emerge. In isolation for example, the GFC correction looks rather devastating, but then so did the 1987 correction. On the wider scale the 1987 correction now looks but a blip, and ANZ chartists are now comfortable the price action from 2000 through to 2009 is merely a correction in the case of the US stock market benchmark, the S&P 500. This time period includes both the dotcom bust and GFC.
Hence US stocks remain in the uptrend which began in the 1930's, post Depression, suggests ANZ. The 2013 push to record highs (notwithstanding the current shutdown wobbles) is "merely the initial leg" within the next cyclical uptrend. Momentum can appear mixed as new highs are marked but the long-term profile remains "extremely" positive, say the technical analysts. Pullbacks should be seen as corrective buying opportunities.
Unfortunately a more complex pattern appears to be forming for the Australian index, notes ANZ. Recent gains have been encouraging but they have faltered within a relatively key upside retracement area while showing a rollover in momentum indicators. Hence, the analysts suggests, there is a risk of corrective pullbacks.
Fundamentally, it is difficult to see how Bridge Street can meaningfully correct if Wall Street is rallying. A Wall Street rally (under its own steam, not Fed-fed) would imply a stronger US dollar and thus a weaker Aussie dollar, which would act as a dampener on any Australian economic downturn. China would be the key, but then if China is in trouble the US is likely to falter as well.
A true chartist ignores fundamentals.
Technical limitations
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