Technical Analysis Australia 200 – Falls Sharply from Six Year High 

Technical Analysis Australia 200 for Friday, August 1, 2014

After being on quite a roll for several weeks, the Australian 200 Index has fallen sharply over the last few days returning back to below the 5550 level in the process. The solid move higher saw it move strongly up through both the 5500 and 5550 levels to reach a new six year high around 5620 earlier this week. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550, which in the last few days has provided some solid support. It reversed strongly a few weeks ago bringing it back down to almost touch the 5400 level before rallying back higher again. At the beginning of June the Australian 200 Index fell and broke back down through the key 5500 level towards a four week low around 5400 before consolidating and resting on support there for an extended period. These two levels have firmly established themselves as significant and any substantial break to either side will most likely be a significant move and be closely monitored. It is quite likely many are sitting on the sidelines waiting for the break before committing as they continue to watch the index move between these two levels.

Back at the end of May, it moved back and forth between the two key levels of 5500 and 5550 before the recent fall. Over the last couple of months the Australia 200 Index has formed an amazing attraction to the key 5500 level as it spent a considerable amount of time trading around it. A couple of weeks ago, the index fell away heavily back down to support around 5400 before returning to the key 5500 level just as quickly, as if gravity had pulled it back. Throughout the last couple of months it has been placing ongoing pressure on the resistance level at 5500 and a few weeks ago it was finally able to move through to a three week high before easing back again to this key level. Several weeks ago it slowly but surely eased away from its multi-year high achieved near 5560 however the following week it fell reasonably sharply and started looking towards the 5400 level which is near where it currently sits. In doing so it returned to back under the key 5500 level which has provided some reasonable resistance over the last few months.

For the bulk of the last few months, the Australia 200 Index has traded roughly between 5300 and 5500 therefore its return to back under 5500 was not surprising. The index has done well over the last couple of months to move steadily higher from support around 5300 up to beyond 5500, forming higher peaks and higher troughs along the way. The support level at 5300 may also be called upon should the index fall lower and will also likely play a role in providing some buffer from any decline. Since February, most of the trading activity has occurred between 5400 and 5500 therefore the former level may also be called upon to prop up prices. The index has done very well over the last couple of years moving from below 4000 to its present trading levels around 5500.

Slow credit growth, falling export prices and a drop in home-building approvals – it was hardly an encouraging set of economic data for Australia on Thursday. But it was a pretty good illustration of the problems facing the economy. A 7.9 per cent fall in the export price index in the June quarter, reported by the Australian Bureau of Statistics on Thursday, was dominated by weaker minerals markets. It extended the fall to since the peak in 2011 to 15 per cent. The fall has been partially cushioned by a lower exchange rate. In foreign currency terms, export commodity prices have dropped over 30 per cent in just three years, according to the commodity price index compiled by the RBA. But the hit to export revenue will still drag on the economy, accentuating the impact of the slowdown in resource sector investment. The building industry is one of the great hopes for the economy’s transition away from mining, the so-called rebalancing.

(Daily chart below)

Australia 200 August 1 at 03:55 GMT 5524 H: 5560 L: 5521

Australia 200 Technical

During the hours of the Asian trading session on Friday, the Australia 200 Index is falling sharply back below the 5550 level after moving strongly for the last few weeks. It is presently trading above the key levels of 5500 and will be looking to see if it can maintain the break and stay above. For most of this year the Australia 200 Index has moved well from the lower support level at 5000 up to the multi-year highs above 5500 in the last month or so.

Further levels in both directions:

• Below: 5400, 5300 and 5000.

• Above: —

Economic Releases

• 01:30 AU PPI (Q2)
• 05:00 JP Vehicle Sales (Jul)
• 08:00 EU Manufacturing PMI (Jul)
• 08:30 UK CIPS/Markit Manufacturing PMI (Jul)
• 12:30 US Core PCE Price Index (Jun)
• 12:30 US Non-farm Payrolls (Jul)
• 12:30 US Personal income & spending (Jun)
• 12:30 US Private Payrolls (Jul)
• 12:30 US Unemployment (Jul)
• 13:45 US Manufacturing PMI (Jul)
• 13:55 US Univ of Mich Sent. (Final) (Jul)
• 14:00 US Construction Spending (Jun)
• 14:00 US ISM Manufacturing (Jul)

*All release times are GMT

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities.

Source: marketpulse

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