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ASX 200 Technical Analysis: Upside Conviction Showing Cracks?

ASX 200 Technical Analysis: Upside Conviction Showing Cracks?

David Cottle, Analyst


Talking Points:

  • The ASX remains near highs not seen since early 2008
  • However, it has shown no inclination to revisit them since they were made earlier this month
  • Watch for a loss of momentum, if not perhaps a spectacular reverse

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The ASX 200 is still looking very comfortable close to ten-year highs.

The Australian stock benchmark’s intraday high of 6160 on January 9 took it into altitudes not seen previously since February, 2008. Since then the index has failed to fall very far even if it hasn’t shown the sort of vigour needed to mount another assault on that high either.

The bulls and bears have slugged it out, with a down-channel broken to the upside last week and the ensuing uptrend snapped by Monday’s lower close. One-all.

Short-term direction does look slightly bearish at the moment admittedly. The index has slipped below its 20-day moving average and, while that measure does remain above the 50-day version, it was within ten points of it at the time of writing (0230 GMT Tuesday). Should the 20-day cross below its longer-term equivalent that could be a ‘bearish crossover’ and a warning that a break lower is coming.

It needn’t be catastrophic of course. But it is perhaps notable that the index is currently flirting with the first, 23.6%, Fibonacci retracement of its long, impressive climb up from the lows of early October. That comes in at 6037.3. The index has been beneath that level and recovered in the past two weeks. However, those currently uncommitted might want to pay close attention to the daily closing levels this week and, indeed to this week’s close.

If it can remain above this level then the range trade of the past two weeks will look safe enough, if not obviously about to burst out to the upside either. It’s a narrow range, to be sure, taking in the 60 points or so between last week’s highs around 6075 and the recent lows in the 6011 area.

But a break lower would put the second retracement level of 5961.6 in play, with 50% pullback at 5900 lurking below that.

--- 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.