Technicals | Sep 22 2020
By Michael Gable
US markets were once again down overnight and the S&P/ASX 200 Index is set to lose a few more points today. Our market has already lost almost 400 points in the last month, yet our proprietary binary model is telling us that we are still within the longer-term uptrend. This means that we are patiently waiting for the next round of buying opportunities. There may be things to sell, but generally that would be to eliminate an underperforming position in preparation to invest in something better.
There are investors out there however who say they are in for the longer term, but they are fixated by the noise and cannot fathom why they don't make money day by day, or week by week, and three months of a sideways market is too much to bear. These are the weak investors who will dump shares into the nearby support level. When that capitulation occurs into a major support level, it is the smart money that steps in and gets the market trending higher again.
We know we are not going to the March lows; we have said that all along, despite other "expert" commentary to the contrary. We also know that our market is still in the longer-term uptrend. The question is, are you going to be the mug that dumps your shares into a support zone, or can you be patient?
Price action overnight in the US has seen indices bounce nicely off their lows. Tellingly, the NASDAQ was the best performer. This means that we could be seeing the slowdown of this recent shakeout in US markets. We may see a few percentage points lower on the downside, but the upside still remains a larger multiple of what we could see on the downside.
Coming back to the Australian market, we have a chart in today's report to put some perspective on where we are in this trading range (ASX200) and where we are likely to see support come in and offset any of the weak investors.
In August, the market was edging above the June high on an intraday basis, only to fall back into the trading range. The most obvious level of support here is the June low near 5,720. A break of that could potentially see a retest of the next major support level, which is also close by, at around 5,500. Therefore, the market is very close to some major levels of support here and any reversals over coming days would signify the start of a decent bounce back towards the top of the range.
Fairmont Equities is a share advisory firm assisting Private Clients with the professional management of their share portfolio. We are based in the Sydney CBD but provide services to private clients across Australia. We believe that the concepts of fundamental analysis and technical analysis of stocks are not mutually exclusive. Regardless of whether you are a trader or long term investor, combining both methods is crucial to success. As a result, the unique analysis of Fairmont Equities is featured regularly in the media such as Sky News Business, CNBC, The Australian Financial Review, and the ASX newsletter. Contact us for a free trial of our research and information on our portfolio management services.
Michael is RG146 Accredited and holds the following formal qualifications:
• Bachelor of Engineering, Hons. (University of Sydney)
• Bachelor of Commerce (University of Sydney)
• Diploma of Mortgage Lending (Finsia)
• Diploma of Financial Services [Financial Planning] (Finsia)
• Completion of ASX Accredited Derivatives Adviser Levels 1 & 2
Fairmont Equities Australia (ACN 615 592 802) is a holder of an Australian Financial Services License (No. 494022). The information contained in this report is general information only and is copy write to Fairmont Equities. Fairmont Equities reserves all intellectual property rights. This report should not be interpreted as one that provides personal financial or investment advice. Any examples presented are for illustration purposes only. Past performance is not a reliable indicator of future performance. No person, persons or organisation should invest monies or take action on the reliance of the material contained in this report, but instead should satisfy themselves independently (whether by expert advice or others) of the appropriateness of any such action. Fairmont Equities, it directors and/or officers accept no responsibility for the accuracy, completeness or timeliness of the information contained in the report.
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