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ASX200: Still In Uptrend

Technicals | May 13 2019

By Craig Parker, asset manager, Moat Capital

As discussed in my previous report, our local ASX 200 decided it needed a break from the up-trending momentum and had a small pullback below the 6350 peak. Technically it is still in an uptrend and this will hold unless the daily trough goes below 6180 or the next move up fails to go above 6380 on the daily chart. I suspect we will see some bearish divergence on the RSI and the ASX 200 struggling to get above the 6350 area.

This could all change next Saturday depending on who wins the election. If the Liberal party wins then there could be some positive market momentum and if Labor wins, it’s possible it will be negative for markets however this will be short term and provide good buying opportunities until investors realise the franking credit policy isn’t as bad as it has been made out to be. Irrational investors always overreact to change. Hopefully investors will then refocus on an investments total return and not just it’s income and franking levels. Whether you draw your retirement income from a shares growth or income is irrelevant it’s all return. As mentioned previously I don’t envy whomever gets in because they have zero control over the China/US trade wars and the global slowdown which will inevitably hit us.

Back to the technical side of things and a look globally and you will find things are looking a little grim. The S&P 500 is nestling along the 60-day moving average and it will be interesting to see whether next week breaks below this average and moves down towards the 200-day moving average. It was a good sign that the Friday range finished on the bullish side however this could signal an exhaustive move. The Dow Jones Transportation Index is bang on the recent uptrend line which is another area to keep an eye on and whilst we are looking at key charts look at the Hang Seng Index weekly chart below. Last week was very negative.

Clearly the trade war is going to hurt China. China will ensure that it also hurts America which isn’t great for any of us. To finish on a positive, note the US volatility index has come off and looking to settle back down into the support area. All in all, next week looks like it could be a quiet one. Enjoy your week!

ASX200 daily

S&P500 daily

Dow Jones Transports Average weekly

Hang Seng weekly

S&P500 VIX daily

Authorised Representative Life Plan FP AFSL 449658

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