There is something just a little absurd about being asked to comment on market movements every single week. Especially when the ASX 200 is at the same level as it was two years ago.
The great bulk of time as a trader is spent scratching your head and thinking about what may be coming next, like everyone else.
But there are certain times when moons align, and the crystal ball starts to clear up a little and give you a hint that a sharp move may be around the corner.
Now is one of those times.
It takes a long time for markets to trace out their patterns, and volatility has a habit of wrong-footing you time and again.
When the long-term trend fades and prices move sideways for an extended period, volume and volatility dry up, and it can feel like an eternity passes before the market is ready to move again.
But, I have found in the past that the longer a market stays rangebound, the larger and quicker the move out of that range when it finally breaks.
The ASX 200 has fallen 270 points (3.7%) in the last three days, which is quite a move, but it may be just the beginning.
It looks like the week will close below the 200-day moving average, which has provided support since November last year. A break of the 200-day will often see more sellers come out of the woodwork.
The ASX 200 is currently at 7,077, and the next major support is at 6,850, which isn’t far away. If that level gives way, I’d expect to see a quick swan dive to 6,600.
The S&P 500 is acting far stronger than the ASX 200 due to the artificial intelligence (AI) craze pumping tech stocks. But as I point out in today’s ‘Closing Bell’, there has been a lot of short covering going on during the rally of the past few weeks.
The S&P 500 is also nudging up against stiff resistance based on my model of buy and sell zones within major waves.
If the S&P 500 turns down sharply in the near term, it can set off a nasty chain reaction quite quickly.
But the weekly trend is still up in the US, so I need to see further weakness before I can become bearish on US markets.
In today’s Closing Bell video, I give you a detailed look at the current set up in the S&P 500 and ASX 200 due to its explosive nature and also outline the short-term bearish outlook for gold.
Until next week,
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Murray Dawes,
Editor, Money Weekend
