Momentum Monitor - 30 January 2019
Momentum Monitor - 30 January 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.

Markets have successfully held primary equilibrium after dovish comments from the Fed

Key Ideas:

US Market – SP500 (2644)
  • The S&P500 looks to be in a consolidation phase between primary equilibrium of 2598 and its 200DMA, at around 2740. The index looks likely to test primary equilibrium for support in the short term. A successful hold of this level will be key for the index in the medium term, with a likely test of its 200DMA.
  • A break above the 200DMA will confirm the index is back in a long term uptrend (currently in a short term uptrend, trading above its 50DMA at 2598). This would then bring primary resistance of 2894 into play, however, the index is likely to encounter some heavy resistance around the 2800 level, given its failure to hold that level late last year. If the index fails to hold the key 2598 level, then it is at risk of testing primary support at 2300.
  • Key drivers for markets this week are the Fed FOMC meeting, a key vote on Brexit amendments, Chinese data and the resumption of US/China trade talks. Things that would get us more bullish in the short term are: a successful re-test of primary equilibrium, the China stimulus package taking effect, confirmation of an easier Fed, an ECB easing, progress in US/China trade talks, a decisive end to the US government shutdown and signs the US debt ceiling will be raised relatively smoothly.
Australian Market – ASX200 (5874)
  • The ASX200 is in a consolidation phase and has continued to successfully hold its primary equilibrium of 5810. The index may well come back to re-test primary equilibrium before making a move higher, towards its 200DMA at 6000. A break above the 200DMA would indicate a long term trend reversal (the index is currently in a short and medium term uptrend, trading above its 50 and 100DMAs).
  • However, were the index to fail to hold primary equilibrium, then it would be at risk of falling to primary support at 5328, below its December lows.
  • Financials have fallen to quarterly equilibrium and need to bounce off this level to regain their momentum. Financials need to hold this level or risk downside to primary support. Resources successfully tested and held their 200DMA on today’s price action, confirming the re-establishment of a long term uptrend.

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.