S&P/ASX 200, AUSTRALIAN STOCKS – Talking Points:
- Negative RSI divergence hints S&P/ASX 200 might be topping
- Short-term chart setup suggests early selloff may be underway
- Break into the low 6300s puts the structural uptrend in danger
An ominous sign has emerged on the monthly chart of Australia’s benchmark S&P/ASX 200 stock index. Prices are testing resistance established by the pre-Global Financial Crisis high in November 2007. A trend line established along major swing highs set by the subsequent recovery from the February 2009 low reinforces the barrier. Negative RSI points to draining upward momentum, which may precede reversal.
S&P/ASX 200 monthly chart created using TradingView
Zooming into the four-hour chart for a look at immediate positioning shows prices breaking below rising trend line support guiding the latest upswing from late-November lows. Bearish follow-through from here paves the way for sellers to challenge the 6604.20-34.70 congestion area, a hurdle bolstered by upward-sloping support in play since mid-August.
S&P/ASX 200 4-hour chart created using TradingView
Taking out the latter level would suggest the near-term upside bias has been neutralized, setting the stage for an attempt at recent swing lows at 6475.40 and 6396.00. Glancing back at the monthly chart, that would put the index well on the way toward clearing the path to challenging 11-year support establishing the dominant uptrend. Needless to say, a tectonic reversal would be in the cards if that too were to fall.
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--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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