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ASX200: In Wall Street’s Hands

Technicals | Oct 22 2018

By Craig Parker, asset manager, Moat Capital

And the fight back begins or more like a crawl back. Gone are the times of a quick recovery after a significant sell down which, suggests a more sombre mood amongst investors. Keep an eye out for the short term down trend line and the 200-day moving average on the ASX 200 daily chart below for some resistance.  The same could be said for our Financial sector although it has more ground to recover to get anywhere near the 200-day moving average.

The Financial sector has sold off harder than other sectors which is understandable considering the findings of the Royal Commission. We should see some further recovery or at the very least some consolidation in this sector in the lead up to the February release of the report. The Banks seem to have set funds aside for potential claims so I would be looking for some upside in the event the compensation isn’t as severe as first thought. The other issue with the Financial sector is the housing market and home prices which are under pressure. All in all, it isn’t a great outlook for the Banking sector. I would expect that the Financial sector will work its way down to the support line on the weekly chart below over the medium term which, should provide a good buying opportunity for those looking for income.

On an international front the S&P 500 is at a critical point right on the 200-day moving average, an average it hasn’t been below since March 2016. A break below this level would spell some serious short to medium term weakness for the US market. Notice that the US 10 Year Note is inching higher and hasn’t fallen indicating that investors believe the Fed is going to continue to push ahead with rate rises placing further pressure on markets in the medium term. Enjoy your week!

ASX200 daily

ASX200 financials ex-REITs daily

ASX200 financials ex-REITs weekly

S&P500 daily

US ten-year yield daily

Authorised Representative Life Plan FP AFSL 449658

www.moatcapital.com.au

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