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ASX200: Not Looking Great

Technicals | Jul 22 2019

By Craig Parker, asset manager, Moat Capital

This week I’ll focus on the international charts first as I think they have a bit to say about the coming direction of our local market. The Friday range on the daily S&P 500 chart could be the confirmation of the shoulder on a head and shoulders pattern. If you look at the S&P 500 monthly chart you will notice that the month of July has been operating within a very tight range. Even though the price action has broken up through the resistance it hasn’t been convincing on the monthly chart and with a bearish 10 days it could still close below the resistance.

Moving to the Russell 2000 Index and the daily chart below has confirmed a continuation of the downtrend with the peak being formed and the price action rolling over in the past week. The short-term uptrend line in the medium term down trend has also been broken pointing to further downside. The price action is still sitting on the positive side of the 60- and 200-day moving average which is good news for now however, I doubt this will hold as was the case back in May 2019.

Another interesting US Index is the Transportation Index which you will notice on the weekly chart below it couldn’t close above the downtrend line and is looking like it is forming a head and shoulders pattern with the resistance being the height of the shoulder. Need to keep an eye on this one as it has been known to be a leading indicator for the large cap US market.

Back to our local market and if you are a candlestick fan you might be seeing last week’s weekly range as a warning signal. It isn’t exactly a hanging man due to the range being green, but it was very close, and the price action is very similar and suggests a sell off early and then the bulls have fought back later in the week. This suggests the bulls are struggling to hang on to their upward momentum. For the signal to be confirmed next week’s range must be bearish. If this does occur, then the next month on the ASX 200 is not looking great. I am very keen to see what happens next week. Enjoy your week!

ASX200 weekly

S&P500 daily

S&P500 monthly

Russell 2000 daily

Dow Jones Transports weekly

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