A couple of weeks ago, I titled my ‘Closing Bell’ video ‘Beware the Bull Trap’.
In the article, I said, ‘I will even stick my neck out far enough for it to get chopped off and say that 7,320–7,470 is the danger zone for the S&P/ASX 200 [ASX:XJO].’
Fast forward two weeks and the high in the ASX 200 since the article was 7,375. Selling emerged over the last week, and as I write this (midday Friday), the ASX 200 is at 7,190, with a possible weekly sell pivot confirmed if today’s trading closes below 7,200.
So there is a chance my head won’t get chopped off after all.
Everything hinges on next week’s FOMC meeting, of course.
We all expect a 50bp rate rise in the States, but the commentary that comes out after the rate rise will decide whether we get a Santa rally or not.
The setup in the ASX 200 is ominous, and there are a few dominoes lined up beneath the market that could set off a chain reaction to the downside.
The S&P 500, on the other hand, is on the edge of looking dangerous but is not quite there yet. I explain in detail what the state of play is in both markets as we head towards the final market-moving event of the year.
Keep your wits about you because if the Fed sparks a sell-off leading into the low liquidity Christmas period, volatility can be exacerbated.
As I said a few weeks ago, if you were having heart palpitations looking at your portfolio value dive in June, perhaps you should have your finger on the button to lower exposure if the Fed steals Christmas.
Until next week,
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Murray Dawes,
Editor, Money Weekend
