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ASX200: Break-Out Must Come

Technicals | Jul 03 2017

By Craig Parker, asset manager, Moat Capital

Nothing to see here as the struggle between the bulls and bears rages on. On the daily chart, the ASX200 has been stuck between the 60-day and 200-day moving average since mid-May, which means we are getting closer to a breakout. To gain a better insight as to the direction of a possible breakout we can also look at the weekly chart which is still holding onto the head and shoulders pattern. A breakout down below the neckline is getting closer to a reality and a move down between the 5500 and 5600 levels.

In saying this I would also be keeping an eye out around the 200-day moving average for possible support although, I wouldn’t be getting my hopes up. The A-REIT monthly chart isn’t looking great at all with a break below the head and shoulders pattern. Expectations of higher rates on the horizon perhaps. Not great news for consumer spending if this is the case. Looking abroad and even though the US market continues to shrug off the Trump controversy and the expectation of higher rates it is looking weaker in the short term with the weekly chart illustrating some clear bearish RSI divergence. The uptrend can only go on for so long before a meaningful correction must happen. Something else to look out for is our volatility index which jumped 13% on Friday and is nearing a resistance level. A break through this level and down we go.

ASX200 daily

ASX200 weekly

A-REIT Monthly

S&P500 weekly

S&P500 VIX

Authorised Representative Sentinel Private Wealth AFSL 344762

Important Information

This document and its contents are general in nature and do not constitute or convey personal advice.  It has been prepared without consideration of anyone's particular financial situation, needs or financial objectives.  Personal advice should be sought before acting on any of the areas discussed.  The authors and distributors of this document accept no liability for any loss or damage suffered by any person as a result of that person, or any other person, placing any reliance on the contents of this document.

Moat Capital has made every reasonable effort to ensure the information provided is correct, but Moat Capital makes no representation or any warranty as to whether the information is accurate, complete or up to date.  To the extent permitted by law, Moat Capital 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).

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