ASX200 Analysis May 2015 (D,W)
Created on Friday, 01 May 2015 02:09
Written by Austin Galt
Some interesting action in the ASX200 took place recently. The continuous contract made a new all time high around 6020 while the cash index failed to do so and turned down at the fourth attempt which is very bearish. Previously, I was a bit unsure as to which scenario would unfold. In the end, both did!
Let’s check out the action using the daily and weekly charts.
ASX200 DAILY CHART
We can see a quadruple top in place at 5996 after price turned down at its fourth attempt at making all time highs which is a bearish development. A false break top is also bearish and is usually followed by a sharp move in the opposite direction which has certainly been the case.
The PSAR indicator shows the dots being busted every which way. This shows the indecision being exhibited by price. This has finally been resolved with a solid move to the downside.
The Bollinger Bands show price toing and froing between the upper and lower bands which is consistent with a consolidation or trend change. Obviously, I favour the latter.
Price now needs to confirm the downtrend by breaking below the previous swing low which is denoted by the horizontal line and stands at 5739. I suspect this will happen imminently which sets up a lower low before a bear rally commences. Then once a lower high is in place the downtrend can begin to gather momentum.
The Stochastic and MACD indicators are both trending down and looking bearish.
Let’s move on to the weekly chart.
ASX200 WEEKLY CHART
The PSAR indicator, which is the loose setting, shows price has just busted support which is a bearish development. Considering this is coming after a parabolic move into high, this now looks like game over. Time for the bulls to say their prayers. And should those prayers be answered then price should move back up and bust the dots that are now on the upside. Unlikely in my opinion!
I have drawn an Andrew’s Pitchfork which has held this final parabolic move higher. The first cracks in the uptrend have just appeared with price nudging below the lower channel line this week.
The Stochastic and MACD indicators have had a bearish bias since the third high and now look headed much lower.
The horizontal line denoted the previous swing high level set in August 2014 at 5679. This may provide support but I expect it to be temporary only.
Summing up, we have been looking for a major top in this vicinity for yonks. That has happened and price has turned down so the bull market now appears done. Nice.