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ASX200: Fundamentals Weigh

Technicals | Apr 08 2019

By Craig Parker, asset manager, Moat Capital

So far things have gone to script with a breakout from the narrow trading range only to struggle to get to the previous peak around 6350. From here things get a little murky. Are we going to shake off the last couple of days of bearish ranges and push upward or are we going to capitulate and let the bears take us down further? Frankly I don’t think technical analysis is going to provide a whole lot of guidance for the next month and our local market will be driven by voters’ perception of what a Labor government would mean for equities.

Quite frankly I think voters give politicians way too much credit for determining where the economy or the markets go. Surely, politicians have no say in the global economic cycle or whether China wants more or less of our Coal and/or Iron Ore. Perhaps I’m wrong and they are wizards. I also think Labor voters are getting ahead of themselves and the Liberal party might be down, but they know how to fight dirty and get up off the canvas. It will be an interesting month ahead.

Getting back to the technicals and if I had to make some predictions, I would have to say I would be erring on the side of the Bears with some significant bearish RSI divergence on the weekly RSI. This is a big call considering Iron Ore is looking to bust through its resistance level of 92 and Oil is continuing its upward momentum above the 40-week moving average. And then there’s China and its recent optimism. I hope a few of you benefitted from my optimism on China a couple of months ago.

In summary if we didn’t have our federal elections coming up, I would have to say that technically we would be bullish with commodities and other markets looking great. However, Australians are more conservative than most and are quick to migrate to the dark pessimistic side and the fear of a Labor government and what it means will drive the short-term movement. Post the election things will settle down and we will see a clearer pattern emerge one way or the other. Shame we are missing out on the upside other markets are experiencing. Enjoy your week!

ASX200 daily

ASX200 weekly

S&P500 weekly

Shanghai Composite weekly

Brent crude weekly

Iron ore weekly

Authorised Representative Life Plan FP AFSL 449658

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