ASX200: Caution Required

Technicals | Nov 12 2018

By Craig Parker, asset manager, Moat Capital

Anyone had a look at the FRED* 10 Year Treasury Note minus the 2 Year of late which is nearing recession signal territory? The vertical grey area is recession (US). Take a breather because the 10 Year minus the 3 month is a little way off yet. Even so these charts need to be closely monitored and historically when they enter negative territory a recession has followed in the proceeding 6 to 12 months. The significance for the share market is that the volatility generally begins long before that.

Look at our local ASX 200 market and you will notice on the daily chart below, the 60- and 200-day moving averages have converged. I would be looking for our market to close in on these two averages only to find resistance and possibly the next wave down. Hopefully we can hold above the 5650-support mentioned last week however, I doubt this will hold. Once volatility enters the market support and resistance levels rarely hold up. The next move down could see the ASX 200 hit the 5500 level which is around the support line on the up trending weekly channel.

Our Financial sector which can dictate the overall market due to its weighting has had a good counter trend up although I wouldn’t expect it to go much further as it is nearing possible resistance of the 60-day moving average. On a slightly positive note for our materials sector the price of Iron Ore has done well of late although I say slightly positive because it is now nearing a resistance level and the RSI is way overbought and due for a correction. Caution should reign, and I would expect to see investors using this recent short-term recovery as an opportunity to sell and recover some of their recent losses only to fuel the next sell off. Enjoy your week!

* Economic database of the US Federal Reserve

ASX200 daily

ASX200 weekly

ASX200 financials ex-REITs daily

Authorised Representative Life Plan FP AFSL 449658

www.moatcapital.com.au

Important Information

This message contains privileged and confidential information intended only for the use of the addressee named above.  If you are not the intended recipient of the message you are hereby notified that you must not distribute, copy or take action in reliance of the information contained in this message.  If you have received this message in error, please notify Life Plan FP immediately.  Any views expressed in this message are those of the individual sender, except where the sender specifically states them to be the view of Life Plan FP.                                        

This email message is intended only for the addressee (s) and contains information, which may be confidential. If you are not the intended recipient please do not read, save, forward, disclose, or copy the contents of this email. If this email has been sent to you in error, please delete this email and any copies or links to this email completely and immediately from your system. The information in this email is not to be taken as taxation, investment or personal advice and is only an indication of the views of the writer and cannot be relied upon by the receiver. Should the information be acted upon the receivers are doing so at their own risk. If the receiver requires this advice to be used and acted upon they will require this to be presented on the letterhead of the writer. Life Plan FP have made every reasonable effort to ensure the information provided is correct, but Life Plan FP makes no representation or any warranty as to whether the information is accurate, complete or up to date. To the extent permitted by law, Life Plan FP 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).

Technical limitations

If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

FNArena is proud about its track record and past achievements: Ten Years On

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms