Technicals | Feb 27 2017
By Craig Parker, asset manager, Moat Capital
It seems the 5800 level I mentioned to look out for last week is now the technical breather point for our market. We will be looking for some form of consolidation between the 5800 and the 5600 level before making another run for the 6000 level. We now cannot say that our market is in a short-term uptrend with the latest peak not able to break higher than the previous peak at the 5800 level. The next level of support is around the 5600 level where the previous trough bottomed out on the daily chart. This level should provide a re-entry point with a breakout to the upside.
Headwinds our market is up against are high Iron Ore prices and talk of the price being overinflated. Technically it is overbought on the weekly and has bearish RSI divergence. Not great signs for further price rises and considering the Iron Ore stocks such as BHP are very weighty on the indexes our market will likely follow tune if they fall further. The Iron Ore price could correct to around the 80 mark which could provide some technical support.
Another negative factor is the US market (S&P 500) being technically overbought and in fact hasn’t been this technically overbought on the daily RSI for over 5 years. A correction here will place further downward pressure on our market. Also, Gold has rallied and is technically looking strong having recently broken through the 1240 resistance barrier which is generally not the best sign for equities markets – unless you are investing in gold stocks. Gold is getting close to the 200-day moving average which might provide some resistance and has had some bearish divergence on the daily RSI.
Let’s see what the Donald has to say about tax policy next week. He might need to say something special as the markets are looking a little nervous. Once his initial affect runs its course then we could be in for some serious volatility. All in all, an interesting couple of weeks ahead.
ASX200 daily
Iron ore weekly
S&P500
Spot gold USD
Authorised Representative Sentinel Private Wealth AFSL 344762
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