ASX200: Momentum Required

Technicals | Aug 05 2019

By Craig Parker, asset manager, Moat Capital

This week’s analysis will unfortunately be my last as I am changing business structures, moving to a new compliance regime and won’t be able to deliver my weekly technical analysis update. The new regime will allow me to provide a quarterly technical update on my new website which will be finalised in the coming weeks. If you would like access to this report, please email me at craig@moatcapital.com.au and I will update you once the web site is up and running. I would like to thank FNArena for the opportunity to provide their subscribers with the weekly technical updates and wish you all the very best in your investment endeavors. And now to the technical analysis!

As mentioned last week things were getting a little hairy and this week the ASX 200 seemed to hit a peak at the monthly resistance line, but not before hitting an all-time high and the weekly range closing higher than the one set back in 2007. In saying this I don’t think this is anything to cheer about because if the price action is anything to go by it is likely that the ASX 200 will now begin the march back towards the monthly support line around 5800. The time frame for this would be in the next 12 to 18 months. For me to be wrong on this the ASX 200 price action would have to break up through the resistance line on the monthly up trending channel. This will require some serious momentum and volume and I just don’t think we are in that phase of the economic cycle.

The fact that our market took 12 long years to get back to it’s all time high is testament to how bad our economy has been allowed to get. And some investors or economists or planners like to tell their clients that our market, including dividends, recovered it’s losses some time ago (back in 2013) however this is cold comfort for those retirees that relied on that income to fund their lifestyle or those investors that borrowed funds and required the dividends to fund the interest on the borrowings.

The bearish divergence mentioned last week on most markets looks like it has finally come to fruition with the S&P 500 falling over in the last few days of the week as well. The US volatility index has lit up which is not a great sign for the coming weeks. Clearly the US market wanted a 50-point Fed reduction. One bright spot is Gold which took off again. In summary the next 12 to 18 months is likely to be ugly which is great news for the astute investor to pick up some cheap stocks and sectors. The short term will see some tussling it out between the bulls and bears with the bears ultimately winning. As mentioned earlier it has been great providing you with the weekly reports and thanks again for reading and all the best for the future. Enjoy your week!

ASX200 monthly

S&P500 daily

USD gold weekly

S&P500 VIX weekly

Authorised Representative Life Plan FP AFSL 449658

www.moatcapital.com.au

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