Technicals | Mar 21 2023
By Michael Gable
The fear in markets seems to be more media driven, in our humble opinion. Talk of recession has always been there but with bond yields a lot lower now, funding for banks being secured, and inflation on the way down, we have the ingredients for beaten-down stocks to rally hard.
The next catalyst is most likely what the US Federal Reserve says and does on Thursday morning. Even if you don't agree with the pricing of rate cuts from July this year, it has to be said that rate rises after this week are all but done, and this is positive for equities.
We started the year with the expectation of one rate rise, then by February the analysts in their tunnel vision were predicting multiple rises and doom and gloom, and now we are back to maybe one rise at most. The US markets have traded very well over these past few days and don't look like they want to go lower.
Our market (chart in today's report) is at a crucial level where there is a strong chance we could bounce from here. There is plenty of talk about a market capitulation around the corner. They could be right, but our advice is to see how things pan out in the next few days and take it from there.
The XJO is retesting the low from the start of January and is therefore worth keeping a very close eye on.
We could be seeing a situation similar to September when the index was retesting the June lows before bouncing higher.
At the moment, the RSI is showing the market to be oversold (circled), and it hasn't been this oversold since the lows in June.
The market could continue lower, however, there is a good chance that we find support here and this is the area where traders need to be looking for opportunities to buy. A solid bounce from here and move back above 7,000 would most likely be the buy trigger. The nearest support level down from here is 6,850.
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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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