Technicals | Oct 08 2018
By Craig Parker, asset manager, Moat Capital
The week started with our market looking like the reality of falling house prices had finally come home to roost. Alas further drops in our dollar with a break through a key support level seems to have provided some hope for our export related stocks. Our dollar is now heading towards the 68 level not seen since 2015. As far as the ASX 200 goes it is range bound with some bullish divergence on the daily chart shifting the expected short-term outcome more towards the upside than the downside.
However, the big news for the week was the US 10 Year Treasury Note breaking out above the 3.10 barrier with some serious momentum with the next level of technical resistance around the 3.70 mark. This has put the brakes on the S&P 500 as can be seen by the daily chart below with the past week trending down. From here on in, the US markets will find it hard to continue the strong upward momentum. It will be interesting to see how this effects our local market with the flow on of rising loan costs irrespective of the RBA rate policy. Our local Financial sector is still looking very sick with a clear down trend albeit a small recovery late last week.
There is some bullish RSI divergence however I wouldn’t be hanging my hat on this. I suspect there could be some further downside to this sector before some consolidation kicks in. The negative correlation between this sector and the Materials sector which has been trending up due to our dollar trending down will determine the outcome of the ASX 200. This doesn’t bode well for a strong recovery up in our market in the near to medium term. Its close to bang on 11 years since the pre GFC high and we are still more than 10% away from reaching those levels. If our dollar continues to trend down and the Financial sector isn’t hit too hard by the final Hayne report in February, then we might see some decent upside momentum thereafter. Until then it is a tug of war between the sector heavyweights. Enjoy your week!
ASX200 daily
ASX200 financials ex-REITs daily
S&P500 daily
US ten-year yield weekly
AUDUSD weekly
Authorised Representative Life Plan FP AFSL 449658
Important Information
This message contains privileged and confidential information intended only for the use of the addressee named above. If you are not the intended recipient of the message you are hereby notified that you must not distribute, copy or take action in reliance of the information contained in this message. If you have received this message in error, please notify Life Plan FP immediately. Any views expressed in this message are those of the individual sender, except where the sender specifically states them to be the view of Life Plan FP.
This email message is intended only for the addressee (s) and contains information, which may be confidential. If you are not the intended recipient please do not read, save, forward, disclose, or copy the contents of this email. If this email has been sent to you in error, please delete this email and any copies or links to this email completely and immediately from your system. The information in this email is not to be taken as taxation, investment or personal advice and is only an indication of the views of the writer and cannot be relied upon by the receiver. Should the information be acted upon the receivers are doing so at their own risk. If the receiver requires this advice to be used and acted upon they will require this to be presented on the letterhead of the writer. Life Plan FP have made every reasonable effort to ensure the information provided is correct, but Life Plan FP makes no representation or any warranty as to whether the information is accurate, complete or up to date. To the extent permitted by law, Life Plan FP accepts no responsibility for any errors or misstatements, negligent or otherwise. The information provided may be based on assumptions or market conditions and may change without notice.
Reprinted with permission of the publisher. Content included in this article is not by association the view of FNArena (see our disclaimer).
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
FNArena is proud about its track record and past achievements: Ten Years On
