Momentum Monitor - 16 April 2019
Momentum Monitor - 16 April 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.


US Markets Move Above Primary Resistance, While Momentum Remains Intact  

Key Ideas:

US Market – SP500 (2907)

  • The S&P500 has successfully met primary resistance of 2895 and is currently holding this level. Given the index is in an uptrend, we would most likely expect it to go on to meet its first extended resistance level at 2965. Were the S&P500 to achieve this level it would mark an all-time high, however the index would then be well into its resistance zone, suggesting that it may be vulnerable to a pullback especially as it gets close to the psychologically important 3000 level.
  • Key support for the index would be at primary support, assuming that this level continues to be held in the short term, the next level of support would be 2760, representing the 200DMA. A break of the 200DMA would indicate a possible long term trend reversal, confirmed by a failure at primary equilibrium of 2598.
  • With the S&P 500 recording its strongest quarterly gain in 10 years and strongest first quarter since 1998, the conversation naturally transitions to what's next. The outlook remains positive, in our view, but we expect higher volatility as well. Sustained yet slower economic growth, in combination with continued growth in corporate earnings and still-low interest rates, are all elements supporting the bull market in stocks and suggest it can continue for a while longer. That said, we caution that the high returns the market delivered over the last 10 years are unlikely to be replicated as we advance in this cycle.
Australian Market – ASX200 (6251)
  • The ASX200 has moved higher from last week and looks set to re-test primary resistance at 6292 again in the coming weeks, with all of the trends continuing to point upwards. A move above primary resistance would position the index for a test of quarterly resistance at 6361 and then first extended resistance at 6405.
  • However, were the index to fail in its re-test of primary resistance then we would expect it to come back to key support around the psychologically important 6000 level, which also corresponds with the 200DMA and quarterly equilibrium.
  • Financials have recovered primary equilibrium, with a move above the 50DMA suggesting a short term uptrend. Resources have pulled back below extended resistance, suggesting the potential for short term downside.
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.