ASX200: We Can Only Wait And See

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.

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