Technicals | Nov 07 2023
By Michael Gable
We had been looking for a bounce from oversold levels, and we finally got that last week.
Markets have run hard in a short period of time, and they will need to cool off slightly before heading higher, but the bounce does look sustainable.
We have spoken before about how bond yields moving up in a straight line can only lead to one thing – a move back down just as quickly. We now seem to have that happening in the US. This could therefore be a major turning point for bonds and therefore equities.
Further to that, falling yields would see a falling US dollar, and that would be a positive for gold and other commodities stocks.
Today's report has an updated chart on the S&P/ASX200 (XJO).
We have previously commented about the bullish divergence on the daily chart. Now on the weekly chart we have a clear reversal signal (circled).
The XJO should therefore head higher from here. Longer-term, the chart since mid-2021 still resembles an inverse head and shoulders where the XJO could go on to retest levels near 7600 and an eventual break of 7600 could see a multi-month rally into the 8000's.
For now, however, we will observe the possibility of some upside from here for the next several weeks and reassess as we go along.
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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
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