Technicals | Oct 29 2018
By Craig Parker, asset manager, Moat Capital
It seems Bears do jump out the windows. It would’ve been nice to get more than a week of recovery after the last significant push down which suggests that we are now entering a more serious Bear market. The short-term trend has been in a Bear market since the beginning of September with the daily ASX 200 chart dropping below its previous low. We are now well and truly into a medium term down trend with the uptrend line on the weekly chart failing dismally to hold up. We are now heading for the long-term uptrend line down around the 5500 level which will be tested in the coming weeks. This would also be at the support level of the monthly up trending channel.
A move to this level would mean a 20% plus correction which is statistically a great time to buy considering we have these corrections every few years on the ASX 200 and they often provide a great buying opportunity. Unless of course this correction is going to be the one in 10 that moves into a GFC like correction. You can see the most recent 20% plus corrections were 2010/2011 and 2015/2016 so we are due for one however, it is a bit sooner than usual and worrying considering the US market can fall much further due to its higher gains and naturally, we tend to follow the US.
Looking at the monthly S&P 500 chart and it could easily go another 10% back towards the long-term uptrend line. The other worrying factor is that we haven’t had the future fall in housing prices flowing into our local share market. Also, the Fear index (US Volatility) is just getting warmed up and hasn’t reached its February heights yet, indicating there could be worse to come. Let’s see if the support line on the ASX 200 formed back in 2017 can help hold us up before the next rout down. Enjoy your week!
ASX200 daily
ASX200 weekly
ASX200 monthly
S&P500 monthly
S&P500 VIX daily
Authorised Representative Life Plan FP AFSL 449658
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