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ASX200: Crucial Week

Technicals | Dec 03 2018

By Craig Parker, asset manager, Moat Capital

To suggest next week is a crucial week could be an understatement. A break below the 5650 level on the ASX 200 and its 5400 here we come. On the plus side the RSI on the daily chart is indicating the opposite with some bullish divergence suggesting a rally sometime soon. Perhaps the rise in the S&P 500 overnight on lessening trade tensions and the overall softening in the Fed rhetoric could be the catalyst for a short-term rally. Or maybe the Santa rally will save us in the short term.

On the bearish side of the equation the S&P 500 is now hitting a short-term downtrend line and nestling into the converging 60 and 200-day moving averages where the price action could develop some resistance. The volatility index is also resting on the positive side of the moving averages primed for a breakout up. Considering we have been closely aligned to the US market of late it isn’t great news. On the local sector front the Financial sector is still mixed with a higher low on the daily suggesting some optimism however, Friday saw a peak lower and resistance at the 60-day moving average.

Other points of interest are the 10 Year Treasury Note around the 3 level where it could get some support in readiness for the next rise in December and the 10 year minus the 3-month Treasury Note again dropping this week below the 70 mark which isn’t a great sign longer term. In summary I suspect Monday we will see a good bullish range on the back of a rise in the S&P 500 and an overly pessimistic drop on Friday with the bulls and bears wrestling it out over the coming weeks around the 5650 level with the bulls winning out in the short term only for the sellers to come back in in the medium term. The heightened volatility can be clearly seen on the downside movements with any negative sentiment being punished by the sellers and any good news met with caution. Enjoy the week ahead!

ASX200 daily

ASX200 financials ex-REITs daily

S&P500 daily

S&P500 VIX daily

US ten-year yield daily

US ten-year yield minus three-month yield

Authorised Representative Life Plan FP AFSL 449658

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