ASX200: Short Term Weakness

Technicals | Apr 18 2017

By Craig Parker, asset manager, Moat Capital

Ooh so close to the 6000! If you happened to be one of those kids that cut the corners when asked to run laps of the oval then you would be hailing the 6000 mark. Alas, we came up 50 points short. Damn Trump and Syria. From a technical point of view our market is still in a short, medium and long term uptrend. We are still looking good from a medium-term perspective although looking very shaky over the short term with the next support level back around the 5800 level. If this level is broken I would be looking to the 200-day moving average for support and a good re-entry point.

The S&P 500 seems to have finally rolled over and as mentioned last week has continued the short-term downtrend. A good breather from the relentless upward movement since Trump became President is a good thing for a longer-term uptrend. The negative is it has broken down through the 60-day moving average which could now mean we are looking towards the 200-day moving average. Obviously, the big unanswered question is how the geopolitical events are going to affect things, specifically when Trump decides to finally take some action on North Korea.  If it turns out to be a quick deal once Kim Jong-un is removed from power and his advisers are keen to capitulate as they are happy to be free from the unstable maniac that could have them executed at any time. In this scenario, the share market would no doubt bounce back from any retreat in a mad fashion.

If not and China were drawn in then we are looking at a whole other story and one which wouldn’t be great for the share market or anyone for that matter.  Perhaps the market will be happy that finally someone is doing something about Kim Jong-un as the markets did when Bush Jnr invaded Iraq and thus began one of the largest bull runs in recent history. For now, when uncertainty is high the big winner is Gold as can be seen from the chart below recently breaking through the 1260 barrier. Perhaps by the time you are reading this Trump will have made a move on North Korea and all will be revealed.

ASX200 daily

S&P500 daily

Gold

Authorised Representative Sentinel Private Wealth AFSL 344762

www.moatcapital.com.au

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