Technicals | Jun 25 2018
By Craig Parker, asset manager, Moat Capital
FINANCIALS! It’s been a nice game of tag team over the past month with the Materials sector benefitting initially from a drop in our dollar and then last week the massive gain in the Financial sector. I mentioned we were due for a counter trend up in this sector but last week was more than that. The long term monthly uptrend line held up, volume ascended as can be seen on the daily Financial chart and the move has surpassed the previous high, all of which could suggest a change in momentum. Does this mean the down trend in Financials is now dead? As much as the buyers were out in force last week to take advantage of the sell off, and why not when some of the gross yields on Bank stocks were getting up around the 9% and 10%. Not quite the 12% gross yields seen in the GFC sell off but close enough and a lot more than the 2.75% offered in term deposit land.
For now, I wouldn’t be getting too excited in the recent bounce as the Financial sector is nearing a weekly down trend line where I would expect some resistance. Ideally, I would like to see some consolidation around these levels and a move back down with a confirmed higher low then I would be more confident in the change of momentum story. In summary I’d expect our overall market (S&P/ASX 200) to take the lead from the Financials sector in the coming weeks. Our dollar looks like it wants to move up in the short term which is likely to place downward pressure on the Materials sector and the other chart to keep an eye on in the coming week is the US 10 Year Treasury Note which has squeezed into the end of a pennant pattern with a breakout likely. A breakout up is more likely which could spell a problem for equities. Enjoy your week!
ASX200 daily
ASX200 weekly
ASX200 financials ex-REITs daily
ASX200 financials ex-REITs weekly
ASX200 financials ex-REITs monthly
US ten-year yield daily
AUDUSD daily
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