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ASX 200 Technical Analysis: Have Bears Won a Long Arm Wrestle?

ASX 200 Technical Analysis: Have Bears Won a Long Arm Wrestle?

David Cottle, Analyst


Talking Points:

  • It looks as though the ASX 200 is attempting a downside range break
  • However, caution is probably warranted
  • That range is quite elderly and the timing looks a bit suspicious

What can retail traders’ decisions tell you about overall foreign-exchange trends? Find out here, at the DailyFX sentiment page.

After a long period of ASX 200 deadlock things at least seem to be moving – in a bearish direction. But “seem” is the operative term and it may be wise to wait.

My last technical look at the ASX 200 index focused I think understandably on the astonishingly narrow band traded by the Australian stock-market benchmark since last May. That tight, 200-odd point band had stood firm against all attempts to break it either way.

It still does but now the index is flirting quite seriously with the range bottom, more seriously indeed than it has at any point so far.

Currently at 5665.4, the 5649 level is June 7’s close and below that is June 8’s intraday low of 5626. Between them they constitute that bottom so the next few days’ closes will make rather interesting watching.

However, it’s surely worth pressing fundamentals into service and pointing out that current weakness stems in large part from a general diminution of risk appetite following North Korea’s missile launch over Japanese territory. This has seen a marked general retreat from equity in favour of perceived havens.

It seems just a little coincidental that the gravest threat to such an established range should come now, when all comparable assets are heading South too. We may of course be seeing the end of gridlocked ASX trade, and the bears may be winning the long arm wrestle. But the index could easily snap right back into range if risk appetite recovers and, if you are uncommitted, it could be best to wait and see whether it does.

Established ranges can die quite hard.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.