Momentum Monitor - 5 February 2019
Momentum Monitor - 5 February 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.

A Dovish FED and Progress on US/China Trade Talk Provides Catalyst for Markets

Key Ideas:

US Market – SP500 (2707)
  • The S&P500 appears to be heading out of its consolidation phase after successfully meeting and holding its 100DMA late last week, moving into a medium term uptrend. With the short and medium term trends heading up, the index looks likely to test its 200DMA at 2741.
  • A break above the 200DMA would confirm a long term uptrend has been established, after previously moving above primary equilibrium of 2598, a key inflection point. A break above the 200DMA would then bring primary resistance at 2894 into play. A failure to successfully test and hold the 200DMA would likely see the index come back to re-test support at primary equilibrium.
  • The Fed’s move to a dovish, patient stance and progress on US/China trade talks have satisfied some of the conditions for shares to do better this year. Others include; Chinese stimulus getting the upper hand, ECB easing, a decisive end to the US government shutdown dispute and signs the US debt ceiling will be raised relatively smoothly, a bottoming in profit revisions and good earnings reporting seasons globally.
Australian Market – ASX200 (5891)
  • The ASX200 remains in a consolidation phase, as its struggles to break through the 5900 level, although it has successfully tested and held its 100DMA, indicating the index is now in a medium term uptrend.
  • With the short and medium term trends heading up, the index would seem likely to test its 200DMA, around the psychologically important 6000 level. A failure at this level would see the index back to re-test support at its primary equilibrium at 5810. 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 failed to successfully re-test and hold quarterly equilibrium and need to recover this level or risk further downside to primary support. Resources have extended higher, meeting but failing to hold quarterly resistance, may retrace some of last week’s gains before re-testing quarterly resistance.

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.