Technicals | Jan 29 2018
By Craig Parker, asset manager, Moat Capital
Before I make any technical observations on the local ASX 200 market I wanted to touch on something of interest in relation to the S&P 500. I know we think the party on the US market seems to be out of control however I did notice something interesting when using a Log chart. If you look at the period from 1988 through to 2000 (approximately 12-year cycle) you will see that the past 9 years from 2009 to present illustrate a very similar pattern. Specifically, the pullbacks in 1989 and 2011 and 1994 and 2015 were near identical for size and duration and currently the S&P 500 is about where the 12-year cycle was in 1996. This means that the S&P 500 could still have up to 3 years to run before a big correction.
This assumes of course the current cycle is 9 years in to a 12-year cycle. A big assumption considering every valuation metric both fundamental and technical indicates overbought in a serious way. Generally, the best sign the animal spirits have hit the markets and it’s time to get out is when mum and dad investors are requesting margin lending into equities. Back to our local market and as mentioned last week the 60-day moving average could be a turning point and considering the US markets went up significantly on Friday we might have some further upward movement come Monday. If we don’t break the 6140 mark in the next couple of weeks, then we could see some mixed price action around the 60-day moving average.
Our dollar breaking the 80-technical barrier is not great news along with the Iron Ore price hitting some resistance around the 79-80 mark. Gold is hitting some resistance again which signals some signs of risk on for equities and Oil is hitting recent new highs which is positive for our energy sector.
ASX200 daily
S&P500 weekly (log scale)
USD gold weekly
AUDUSD daily
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