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ASX200: Upside, But With Risks

Technicals | Jul 23 2018

By Craig Parker, asset manager, Moat Capital

This week I have started with arguably the most important chart of them all, the US 10 Year Treasury Note. This week saw it poke it’s head out of the pennant pattern and looks like it is preparing for a breakout up. This would spell a problem for the US market and possibly other global markets with a flow on effect to our market. For now, we are bucking the trend with continued positive momentum predominately driven by the recovery in the Financial sector. The Financial sector has now moved above the 200-day moving average which is a positive.

If you look at the ASX 200 weekly chart we are heading for the 6500 level within the up-trending channel. A couple of things I am concerned about with this latest upsurge in our market is the upcoming focus on Superannuation in the royal commission and considering our market is being driven by a recovery in the Financial sector this could be an issue. The other issue is the daily and weekly RSI indicator on the ASX 200 charts which are flatlining suggesting, some possible momentum headwinds.

Other areas of the market to focus on are our dollar which is showing signs of heading back towards the 75 level and Iron Ore which is currently in a holding pattern with little signs of strength. This is the reason why our market is currently beholden to the Financial sector. This sector concentration drastically increases your market risk. Perhaps our policy makers in Canberra can look to form polices to help better diversify our economy away from bricks and mortar and a few rocks. Enjoy your week and keep an eye on the US 10 Year Treasury Note!

US ten-year yield daily

ASX200 daily

ASX200 weekly

ASX200 financials ex-REITs daily

AUDUSD daily

Authorised Representative Life Plan FP AFSL 449658

www.moatcapital.com.au

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