Technicals | Mar 20 2017
By Craig Parker, asset manager, Moat Capital
Our market is currently dancing around the 5800 ceiling and from a technical standpoint is set up very well to make a break through 5800 and head for the 6000 level. We have recent higher lows on the daily and the weekly and monthly charts are in uptrends. The monthly chart looks particularly good however the weekly chart has some bearish RSI divergence. Our market is squeezing into a corner ready for a breakout in either direction. The technical signals would suggest the upside is favoured in the short term. If this is the case, then I would be getting very wary at the 6000 mark.
The big elephant in the room is the S&P500 and the fact that it is still technically very overbought with clear bearish divergence on the RSI. This combined with the daily price action being a considerable distance from the 60-day moving average and daylight to the 200-day moving average should spell some need for caution. This cannot last and when it corrects our market is likely to follow. Technically the market can hover along the 60-day moving average for a long period when a strong trend is in place so you can ignore the 200-day moving average in this instance. It will be interesting to see how the market digests Trumps budget. The democrats suggest it is good for big business and not so great for the Trump supporters. Poor and middle class copping the brunt. Sounds good for the share market and not so good for every day Americans. They seem to embrace doing it tough. Time will tell. Gold has also had a little jump of late which can suggest some caution is creeping into the market. Investors will need to be close to the exit if they wish to avoid the worst of a correction.
Authorised Representative Sentinel Private Wealth AFSL 344762
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