Momentum Monitor - 4 December 2018
Momentum Monitor - 4 December 2018

Topic

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.
 

Trump and Xi Agree to Halt Tariff Increases: A Short Term Positive for Markets

Key Ideas:

US Market - SP500 (2760)

  • The S&P500 recovered from its monthly lows last week, extending through quarterly support at 2730 and going on to meet its 200 day moving average (200DMA) at 2762 and primary resistance at 2765. If the index can successfully retake and hold primary resistance, it could signal the start of a new short to medium term uptrend, although first extended resistance at 2819 has proven to be a difficult level for the index to get through after breaking below in early October.
  • As we move into 2019, the low to mid 2700 level will become crucial, as it represents primary equilibrium, a key inflection point for the index. A break above this level would signal a new uptrend is emerging, while a failure to hold would see the index come back in search of key support around the 2540, representing 2019 primary support.
  • The 90-day suspension of new trade tariffs between the US and China is a short-term positive for markets, creating the potential for a rally into year-end. The Fed will hike rates in December but appears open to a pause and slower pace of rate hikes next year. Meanwhile a no-deal Brexit, political uncertainty in Spain and the EU rejection of the Italian budget could negatively impact market sentiment.
Australian Market - ASX200 (5771)
  • The ASX200 once again tested primary support at 5658 last week, managing to hold this key level, before bouncing 100 points in Monday’s trading. The next risk target for the index is primary equilibrium at 5914, which has proven to be a key resistance level since the index broke below in early October.
  • The current risk appetite in equity markets may push the index higher before the end of the year, with a likely peak around 6050. However, with the long term downtrend still intact, we can envisage the market being weaker into 2019. Primary support is emerging around 5500, a level we may reach before this market correction eventually plays out, sometime in early to mid-2019.
  • Financials have successfully held the extended support level and appear to be in a short term uptrend. Next target is first extended support although the long term downtrend remains intact. Resources have successfully retaken primary equilibrium and may well continue to move higher from here. Next target is the 200DMA, with the long term uptrend remaining at risk.


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.