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ASX200: Caution Required

Technicals | Jun 11 2019

By Craig Parker, asset manager, Moat Capital

Onwards and upwards with the short-term uptrend remaining intact. I hate to put a dampener on things, but I have been watching the S&P 500 of late and you will notice that the trading ranges over the past 12 months have been getting longer and the past week was no different. Sure, it helped the S&P 500 recover some losses however a large outside range is nothing to celebrate. It suggests a market hanging on, desperately trying to get back to the good old days of higher and higher peaks. And as the saying goes if the US sneezes the rest of the world catches a cold. It will be interesting to see if this rings true because at the moment our market is truly a shining light in an otherwise global darkness.  Some other negative technical points are:

  1. Gold and the great couple of weeks it has had which indicates investors are reducing their risk exposure. Support at the 40-week moving average but nearing resistance. A break up through this level would be a game changer for investor sentiment and very bearish for equities.
  2. US volatility forming a trough higher than the previous confirming a short-term uptrend.
  3. Dow Jones Transportation Index well below the 60- and 200-day moving averages illustrating serious weakness.
  4. Hang Seng Index in a confirmed long term down trend with weekly peaks lower than previous and looks like it is heading back to its 20-year long term uptrend line around the 24000 level which is another 10% down.

In summary I would be looking to ride the recent wave in the short-term uptrend but be wary the next couple of weeks and perhaps taking some profits will be a prudent strategy. Enjoy your week!

ASX200 daily

S&P500 weekly

Hang Seng weekly

USD gold weekly

S&P500 VIX daily

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