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ASX200: Trade Related

Technicals | Feb 25 2019

By Craig Parker, asset manager, Moat Capital

So here we go again with bad news resulting in good news for the market. Talk of rates dropping from the already ridiculously low rate of 1.5% and markets see it as a good sign. Surely the fact that we are looking to go below the 1.5% is a very bad sign of the current and forecast state of the economy. This is going to end in a very unhappy mess and the problem this time around for us locally is we will have no monetary stimulus available and who could count on the government for any fiscal intelligence.

Technically it is looking increasingly likely that we will have a V shaped recovery. I know I mentioned some weeks back that the recent high was going to be the peak prior to a medium to longer term down trend. It now looks like I might end up with some egg on my face. Won’t be the first time nor the last. You’ll notice on the monthly ASX 200 chart below that the RSI is back in overbought territory so it is likely we will see some trouble ahead for the short-term bullish movement we have seen. So, I’m still holding out on the prediction mentioned above. If the US and China come to a trade agreement then it looks like I will be proven wrong, especially considering we only have 2.9% to reach the previous peak and we are now consolidating above the 200-day moving average which is a bullish sign.

Our Financials sector is also looking to break out above the 200-day moving average having broken through the resistance level I mentioned to keep an eye on last week. The daily Financials chart does have some Bearish divergence on the RSI however, it is restricted to the daily chart only, which is a weak indicator. Overseas and the S&P 500 has about 5% to go before it reaches its previous peak and is nearing resistance at 2800 and Gold has been impressive in its comeback which is a confusing sign. Confusing because the risk on and risk off investors have moved in unison. The tussle continues.

Again, as I said last week, I would be sticking with my forecast of short term sideways to upward movements with the medium to long term trend looking to be a challenge. Enjoy your week!

ASX200 daily

ASX200 monthly

ASX200 Financials ex-REITs daily

S&P500 daily

USD gold weekly

Authorised Representative Life Plan FP AFSL 449658

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