ASX200 Analysis March 2015 (D,M)
Created on Sunday, 01 March 2015 01:53
Written by Austin Galt
The ASX200 has now reached my long term target for rally high but that doesn’t mean the high is in. Let’s examine the situation using the daily and monthly charts.
ASX200 DAILY CHART
There looks to be a “three strikes and you’re out” top in place at 5955. This is bang in the zone I was looking for the high to form. This high was also accompanied by triple bearish divergences in the Relative Strength Indicator (RSI), Stochastic and Momentum indicators.
So we are now at a critical juncture. The final top may very well be in place.
The Bollinger Bands show price potentially finding support at the middle band. Will that support hold? I don’t know. With triple bearish divergences showing on the lower indicators, I’ve got a good case of the heebie-jeebies!
One potential scenario to unfold could be price breaking down but finding support at the lower band which is at 5750 and rising daily. Price could then launch the final move to high from there.
Price also found support given by the Parabolic Stop and Reverse (PSAR) indicator and busting those dots on the downside now may be an indication the top is indeed in place. Those dots stand at 5873.
Let’s move on to the monthly chart.
ASX200 MONTHLY CHART
We can see price has reached my long term target being the 76.4% Fibonacci retracement level of the move down from 2007 high to 2009 low. This stands at 5959 and a 5955 top doesn’t get much closer.
This high looks set to show a triple bearish divergence on the lower indicators being the RSI, Stochastic and Moving Average Convergence Divergence (MACD).
The Bollinger Bands show price is trading above the upper band so a solid top is in or is in the process of being put in.
The PSAR indicator has a bullish bias with the dots underneath price.
Now while the final top may well be in place let’s investigate any other potential rally ending levels in case the rally has not finished.
Price often pushes things to the limit and I have often found price putting in final highs and lows somewhere between the 76.4% and 88.6% Fibonacci retracement levels. The 88.6% level stands at 6420 and I don’t favour price reaching that level. However, I do rate a serious chance of price getting up midway between here and there. Halfway is 6190.
I have added a Fibonacci fan from the 2007 high to 2011 low and price hitting the 88.6% angle in the next month or two will be right around the midway mark.
So what is my opinion?
Without any substantial evidence of price breaking down I just can’t call the top. Well, not the final top.
So what are the likely scenarios going forward?
If price were to trade up to a marginal new high in early March then that would likely set up a quadruple bearish divergence on the fourth strike high. That would really nail down the top in my opinion.
Some interesting timing is set to hit in early March. The ASX200 often trades in a 144 day cycle and March 7th will be 144 days from the October 2014 low. That is a Saturday so the end of the first week and start of the second week in March will be watched with interest.
If the current top holds now and price retreats then perhaps after a correction of a few percent price launches higher and puts in the final top between 6100 and 6200.
Which scenario do I prefer?
My lack of patience would prefer a fourth marginal high in early March!
Whatever happens, we are indeed in the end game of this rally that began in 2009.