Technicals | Sep 27 2022
By Michael Gable
We have had the second week in a row where share markets have been gripped by fear.
It is a great example of how nothing has really changed; only investor's feelings and sentiments have changed.
We can argue that the US CPI print wasn't that bad and was backward looking. With shipping rates and oil prices going down, and stock inventory building, there is a good chance that inflation is, thereabouts, peaking.
Whether it was last month or next month, it doesn't really matter in the greater scheme of things.
Then we had the US Federal Reserve raising interest rates by 75 basis points – which was expected. There are fears of a recession – a recession that the US is probably already in. But markets are forward looking and generally bottom when the recession hits.
The next big trade would be to the upside as markets start to price in a recovery. I don't think much has really changed from a couple of months ago. The only difference is that markets were willing to look beyond the issues back then.
Now, markets are fixated on the negatives and extrapolating out to a "the world is going to hell" scenario. I don't want to downplay investors emotions because it is a very important input to what stock prices do.
Price action is all that matters at the end of the day, and for now it is skewed to the downside and not really giving us a lot to work with. Maybe we base here and go higher, but there are no buying set-ups.
There is also a chance that we go lower, but we are at levels where we cannot be confident yet that that will occur.
Sometimes we just have to have zero expectations, not rush things, and just let the market tell us where the herd wants to head to next. Now is one of those times. Possibly by next week's report we have some clearer signals as to where we head to next. Once that happens, then we can look to sell or buy.
For now, we need to wait and observe price action. The chart in this week's report is of the S&P/ASX 200 Index.
The last two weeks has seen the market fall from about 7000 all the way back to the June lows.
It now is in the area where we could see some support step back in. If we see some support come in, we then need to observe price action to determine if we get a bounce from there, or if the market is merely taking a breather before recommencing the downtrend.
For now, we need to wait and see.
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Michael Gable is managing Director of Fairmont Equities (www.fairmontequities.com)
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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