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ASX200: Heading South

Technicals | Mar 11 2019

By Craig Parker, asset manager, Moat Capital

Looks like this week was the last of the bullish run and the short-term uptrend has run its course. I’m not sure how long we (ASX 200) could last considering the Dow Jones Transportation Index I mentioned the previous week had rolled over leading the S&P 500 over last week. And to cap it off it looks like our friendly Chinese neighbor has just lost momentum. On the ASX 200 daily and weekly charts the RSI indicator is illustrating bearish divergence and I would now be looking for a move back towards the 60 day and 200 day moving averages.

The ever-important Financials chart has weekly RSI bearish divergence and it doesn’t look like it is going to get back up to the medium term down trend line which suggests the secondary downtrend is accelerating. Nothing short of the RBA announcing a rate reduction will holt the slide. It will be interesting to see if this strategy works this time around considering we have just 150 bps to zero. The government will have to come up with some innovative policies to keep us chugging along. Simply adding more people won’t cut it.

If you look at our monthly chart, we are now into the 12th year post pre-GFC high set in November 2007 and, assuming we are heading into troubled waters we are a long way off recouping the drop. Let’s hope we can hold onto the up-trending channel in the monthly chart. I was hoping I was wrong with my previous predictions of our market not achieving its recent high as this would mean a confirmation of the downtrend. Adding to the negative narrative is the weekly chart representing US market risk (CBOE Volatility) which has just hit a support level and broken up.

One positive out of all this is our local Listed Property Trust sector as can be seen by the chart below breaking above and consolidating into a medium-term uptrend. Clearly property likes the thought of the talk of lower interest rates and it’s promising that it has finally negatively correlated with equities. For too long now it has gone the way of equities and provided little to no correlation buffer. I’d say enjoy the week ahead, but I am not sure it’s going to be a good one.

ASX200 daily

ASX200 weekly

ASX200 monthly

ASX200 financials ex-REITs weekly

ASX200 REITs weekly

S&P500 daily

Dow Jones Transport Average weekly

Shanghai Composite daily

S&P500 VIX weekly

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