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ASX200: Unlikely To See A ‘V’

Technicals | Feb 19 2018

By Craig Parker, asset manager, Moat Capital

All looks good on the technical home front with support on the 200-day moving average and a clear recovery right on the 2-year uptrend line. Couldn’t be more predictable or perhaps not. I just get that sinking feeling that we are moving into a medium-term downtrend as I just can’t see our market getting back above the recent high of 6140 in the short term. We just don’t have a Trump in the house who seems to invite V recoveries.

Whilst on the V recovery, has it run out of steam already? If you were a Dow Theorist, you might be looking at the Dow Jones Transportation Index (DJTI) which can sometimes be a leading indicator to the Dow Jones Industrial Average. If you look at the DJTI daily chart below you will notice Friday ran out of puff and the 60-day moving average could be a new level of resistance. I would be watching the 60-day moving average closely on this Index.

On a local positive front, the Financial sector is nearing some support and a 10-year uptrend line which could provide some further impetus to the minor recovery underway from the large falls of the previous week. If you’re a long-term investor it should provide further buying opportunities. The all-important chart to keep an eye on is the US 10 Year Treasury Note which represents the pain on the horizon. This time I have used Log scale on the chart and it doesn’t seem as bad as the Linear chart. The Log chart hasn’t broken the 30 year down trend line whereas it has when using a Linear scale chart. It is also nearing the important yield price of 3 which could provide some resistance and temporary relief for equities markets.

Interesting couple of weeks ahead. The Winter Olympics will be finishing up and the focus will be back on North and South Korea and whether the little lovefest in Pyeongchang will last. Very doubtful.

ASX200 daily

ASX200 financials ex-REITs daily

Dow Jones Transportation Average daily

US ten-year yield weekly (log scale)

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.

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