Technicals | Nov 14 2016
By Craig Parker, asset manager, Moat Capital
Wow what a week it was in the markets. The Donald is in the house and markets didn’t know whether it was a catastrophe or a blessing. Our markets were even wilder due to the time difference and the need to make up for the over selling on Wednesday. If you happened to implement an Options Strangle prior to the election you would’ve had a nice rollercoaster ride of jubilation to exasperation and back to jubilation. Markets have currently seen Trump as a savior although how long this lasts is anybody’s guess.
If you have a look at the daily chart for the S&P/ASX 200 below you will notice that it now has some support around the 5200 level and is nearing a medium-term downtrend line. If it can break through this downtrend line and make a higher high above the previous level of around 5500 then it is a bullish sign for the medium term. I’ll be watching closely around the 5500 level. You will also notice some bullish divergence on the RSI indicating a reversal. If you are a Dow Theorist, then the DJ Transportation index has had a strong move up alongside the Dow Jones Industrial Average indicating bullish sentiment as well.
There is some discrepancy in our market when looking at the weekly chart below as it is still in a downtrend with lower highs and lower lows than the previous. In the short-term I would tend to look more closely at the daily chart as it has the support around the 5200 with some very strong moves up on significant volumes.
If you look at the S&P/ASX 200 from a monthly perspective, it is reasonably bullish as it has recently broken up after hitting a long- term uptrend line as can be seen below. This could indicate a gradual move over the next 12 months back up towards the 6000 level. It will need to be watched closely along this trend line for a drop below which could indicate a change in momentum. Interesting year ahead!
Authorised Representative Sentinel Private Wealth AFSL 344762
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