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ASX200: Lacking Conviction

Technicals | Dec 18 2017

By Craig Parker, asset manager, Moat Capital

The S&P/ASX 200 had a dead flat week with the market giving up its meagre gains Friday. When looking at the weekly chart we are possibly in for some mixed action in the short term as we head back towards a medium-term uptrend line. The move was mainly due to our Financial sector rolling over, confirming a continuation of the downtrend that has been in place since October and now has resistance around the 60 and 200 day moving averages which, isn’t great news for our overall market. Currently it is hard to tell whether the current sideways movement is a consolidation pattern or a distribution pattern.

If the next move is up then you would expect to see rising volumes on the recent move up which there wasn’t, in fact there were declining volumes which suggests there isn’t a lot of conviction in the upward trend. On the other side of the Pacific the S&P 500 still needs a much-needed breather and with the bearish RSI divergence and the US volatility index around support levels with some upside potential, I would look to see the S&P 500 head back towards the 60-day moving average in the medium term. Technically the S&P 500 is forming some headwinds considering it is in ridiculously overbought territory and with bearish RSI divergence it could make it difficult for our local market to hit new highs in the near term.

Combined with our dollar having a very good week and if you read my report on the 2nd December I mentioned the bullish RSI divergence was indicating some possible upturn in our dollar and unfortunately this hasn’t aided our equities market. I doubt the move will hold though and I will be watching our dollar around the 60 and 200 day moving averages for some resistance.

ASX200 daily

ASX200 weekly

ASX200 financials ex-REITs daily

S&P500 daily

S&P500 VIX daily

AUDUSD daily

Authorised Representative Sentinel Private Wealth AFSL 344762

www.moatcapital.com.au

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.

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