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ASX200: Watch the S&P500

Technicals | Mar 04 2019

By Craig Parker, asset manager, Moat Capital

They say the hardest part of the climb is nearing the peak and it seems to be no different with the ASX 200. We are inching higher after Tuesday's larger than normal move down. The problem with this is the inches can be defeated in a moment when the bears come to town. To get a better idea of the potential movement in the ASX 200 we must look at the Financials chart below which is now consolidating above the 200-day moving average. This is a bullish sign at least for the short term because, if you look at the weekly chart it is nearing the medium term down trend line where it is likely to find resistance. This would suggest some short-term optimism considering the allocation of the Financials sector to the overall market, but it will be fighting it out with the possible downward momentum of the Materials sector in the short term.

On the weekly Materials chart below you will see that it is coming up against a long term up trend line which sometimes offers resistance. This is combined with the chart on Iron Ore which has hit a resistance level. Because of this I suspect the ASX 200 is more likely to track sideways in the coming weeks. On a very positive technical note how good is China looking right now with its break above the 40-week moving average and 200 day moving average.

Also looking globally, we cannot ignore the S&P 500 and next week is a key week from a technical perspective point of view. The S&P 500 is up against the resistance level of 2800 mentioned a couple of weeks ago. A break through this and it is happy days for all markets as a rising tide floats all boats. A pull back and we may have hit our peak. A concern is the Dow Jones Transportation Index (which is often used by Dow Theorists as a leading indicator) has just peaked. Let’s hope there is some wind left in the sails of this short-term bullish move yet, especially considering the recent market movement in China. Enjoy your week and keep an eye on the S&P 500!

ASX200 daily

ASX200 financials ex-REITs daily

ASX200 financials ex-REITs weekly

ASX200 materials weekly

S&P500 daily

Dow Jones Transports Average weekly

Shanghai Composite weekly

Iron ore weekly

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