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ASX200: Upside Confidence Returns

Technicals | Oct 06 2015

By Michael Gable 

A remarkable week on the market, where we saw it drop nearly 200 points last Tuesday, only for it to recover extremely strongly after that. Back in August, we predicted a retest of the low to occur after a month or two and that has now occurred. As we've said before, its only a matter of time until the market sentiment turns and our experience is saying that this is now occurring. The difference is whether you can identify and accept that now, or wait for the market to be 500 points higher and miss most of the opportunities. Read more about the market in our commentary on the S&P/ASX 200 Index (XJO) today.
 

When we last looked at the S&P/ASX 200 Index, it was on 25 August, the day after the market fell over 200 points and on the day that it fell under 5000 for the first time this year. At the time our advice was to expect a quick bounce followed by a retest of the low a month or two later and "with the passage of time for people to clear their heads and be a little less emotional, “value” is suddenly staring them in the face and the market resumes the uptrend." The market went on to bounce and then 1.5 months, later it retested the low, exactly as predicted.

Given the strong buying of the last week in reaction to our "retest of the low", we are now starting to feel confident that we have found the low and that the sellers have been washed out of the market. On the chart, we can see the market up at some resistance, and although some buying can start to happen again, we would proclaim to be much more confident of a low when we see a strong close above 5300.

Content included in this article is not by association the view of FNArena (see our disclaimer).
 
Michael Gable is managing Director of  Fairmont Equities (www.fairmontequities.com)

Michael assists investors to achieve their goals by providing advice ranging from short term trading to longer term portfolio management, deals in all ASX listed securities and specialises in covered call writing to help long term investors protect their share portfolios and generate additional income.

Michael is RG146 Accredited and holds the following formal qualifications:

• Bachelor of Engineering, Hons. (University of Sydney) 
• Bachelor of Commerce (University of Sydney) 
• Diploma of Mortgage Lending (Finsia) 
• Diploma of Financial Services [Financial Planning] (Finsia) 
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2

Disclaimer

Michael Gable is an Authorised Representative (No. 376892) and Fairmont Equities Pty Ltd is a Corporate Authorised Representative (No. 444397) of Novus Capital Limited (AFS Licence No. 238168). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.

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