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ASX200: New High Ahead

Technicals | Jul 08 2019

By Craig Parker, asset manager, Moat Capital

So much for heading back towards the 60-day moving average. RBA rate cuts have done their job as predicted. Scary thing is the RBA hasn’t got a whole lot more to play with and the Liberal party wouldn’t know how to implement any type of economic reform if hit them in the face and the Labor party is a pathetic pushover. Scott Morrison did say he believes in miracles but let’s hope he is not relying on one to get us out of or at least soften the blow of the upcoming recession. Hopefully he listens to the RBA governor although, I won’t be holding my breath.

Back to the technical analysis and check out our weekly chart below and specifically the length of the recent upward movement which you will notice is on par with the previous prolonged bullish movements back in 2012 and post GFC bottom. I dare say we will hit our all-time highs of around 6850 which were reached back in November 2007 and then develop some resistance around the monthly up trending channel as can be seen on the monthly chart. The Financials chart below is very positive at the moment with consolidation above the long term down trend line and the 40-week moving average which can suggest a change in momentum. This is a good sign for our market considering Financials is the largest sector.

The other big contributor is the Materials sector and specifically Iron Ore companies with the weekly Iron Ore chart below illustrating a very steep uptrend which will come to an end soon. We really are the lucky country when the two sectors that are the biggest contributors to our market have been in lock step. Naturally luck never lasts, and we’ll see problems develop on the technical front in the coming weeks or months.

Another short-term positive is the Japanese market as represented by the Nikkei 225 weekly chart below which, has developed a higher low and broken through the 40-week moving average. If the Nikkei can set a new higher high, then that could be a time to rejoice but until then I will be holding off. In the short term lets enjoy the ASX 200 getting back to our all-time high and perhaps breaking through and setting a new one. It’s only been just over 11 years which is a long wait for those that had the nerve to hold. Enjoy your week!

ASX200 daily

ASX200 weekly

ASX200 monthly

ASX200 financials ex-REITs weekly

Nikkei 225 weekly

Spot iron ore weekly

Authorised Representative Life Plan FP AFSL 449658

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