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ASX200: Stuck In A Range

Technicals | Mar 19 2018

By Craig Parker, asset manager, Moat Capital

Confusion reigns as our market is squeezing into a pennant pattern and stuck between the 60-day and 200-day moving average with support around the 200-day moving average being a positive. On the weekly chart we are teetering around the critical 2-year uptrend line with a break to the downside spelling possible further moves down around the 5800 level. The financials sector weekly low is hanging on by a thread with all the bad luck stories coming out of the royal commission.

So far, the Aussie battler is getting the sympathy. Those who thought they could make a fortune by buying multiple properties in no good mining towns and gloat to their friends about how many investment properties they had like they were a property guru. If following this royal commission, the banks must consider a person’s financial literacy when applying for a loan then the Bank sector is looking at guaranteed negative loan growth. Expect a lot more negative press in relation the Banks. The technical analysis in the financials sector is indicating weakness with resistance at the 60-day and 200-day moving average on the daily chart with the good news being support around 1% to the downside which could create further buying opportunities and support our overall market.

The most important chart to look out for in the coming week and the biggest question is, has the 10 Year US Treasury Note bottomed out with its recent counter trend? The daily chart has formed a higher low in the recent minor trend and is in a descending short-term triangle pattern. It will be interesting to see which pattern wins out. My guess is on the higher low with further upside next week which could put the brakes on the equities markets recovery since the past shock.

Even if the S&P 500 were to reach back to its high the bearish RSI divergence on the weekly chart would be significant and cannot be ignored. Perhaps locally our dollar dropping back will help. Will be an interesting week ahead with a US rate rise on the cards and the chaotic West Wing. Enjoy your week!

ASX200 daily

ASX200 weekly

ASX200 financials ex-REITs daily

ASX200 financials ex-REITs weekly

S&P500 weekly

US ten-year yield daily

AUDUSD weekly

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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