Momentum Monitor - 12 March 2019
Momentum Monitor - 12 March 2019

This report monitors market risks by tracking the support and resistance levels used by high frequency traders and applies the principle of trend identification and mean reversion to identify high probability risk targets.

The below is a preview from our Momentum Monitor research report. To view this report in full visit the Patersons Client Portal.

S&P500 Momentum Falters as Concerns Rise Over Global Growth  

Key Ideas:

US Market – SP500 (2743)
  • The S&P500 has failed to hold the key 2800 level and has fallen back, a risk we highlighted last week. Thus far, the index has come back to find support at the 200DMA at 2748, although it closed just below this level on Friday. The S&P500 needs to recover this level in the next few trading sessions or risks ending its long term uptrend and extending its decline towards the next key level of support, being its 100DMA at 2669, which also corresponds to the newly emerging quarterly equilibrium.
  • A failure to hold this level will likely see the market head back to primary equilibrium at 2598. If the index does recover its 200DMA in the short term, then we would expect to resume its ascent towards primary resistance of 2895.
  • Reports indicating that the US and China are close to a trade deal and a global shift to policy stimulus is supportive of global growth improving into the second half this year. The
    combination of stronger growth supporting profits and still easy monetary policy will likely provide a positive environment for equities. However, the issue in the short term though is that global share markets have recovered dramatically from their December lows, which makes them vulnerable to a short-term pullback, especially with global economic data still weak currently.
Australian Market – ASX200 (6180)
  • The ASX200 came close to meeting primary resistance at 6292 last week, but ultimately fell short after hitting a high of 6271. With the index in a long term uptrend it still appears likely to test primary resistance at 6292 in the coming weeks, although that might be impacted by the short term direction of US and global markets. However, the key issue for the index will be whether this proves to be a major resistance level and the one where it fails to break through.
  • If the index continues to fall further from here, given the short term downside risk, then we would expect the ASX200 to pullback to either its 200DMA at 6000 or its primary equilibrium
    at 5810.
  • Financials have retraced further from quarterly resistance and need to bounce off key support at the 200DMA. Resources have re-tested support at the first extended resistance level
    although now appear vulnerable to a move lower.

Warning: This report is intended to provide general securities advice, and does not purport to make any recommendation that any securities transaction is appropriate to your particular investment objectives, financial situation or particular needs. Prior to making any investment decision, you should assess, or seek advice from your Adviser, on whether any relevant part of this report is appropriate to your financial circumstances and investment objectives.