Momentum Monitor - 9 April 2019
Momentum Monitor - 9 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.

Rising Optimism on Global Growth and US China Trade Deal Leads to a Golden Cross  

Key Ideas:

US Market – SP500 (2893)
  • The S&P500 has bounced convincingly off the psychologically important 2800 level in the past two weeks, with the 50DMA moving above the 200DMA for the first time since June 2018 (known as a “golden cross”) and is just shy of primary resistance at 2895.
  • In order for the index to continue its ascent it needs to successfully test and hold this key level in the coming weeks. This would then set the index up for a test of first extended resistance at 2965, representing a new all-time high for the S&P500. However, were this to occur, the index would be well into its resistance zone and would be susceptible to any short term pull backs. Key support exists at the 200DMA, around 2755 and primary equilibrium at 2598.
  • US share markets have recovered quickly from their December lows and are still vulnerable to a short-term pullback. However, equity valuations are still reasonable (especially in the context of low bond yields), global growth is expected to improve into the second half of the year, monetary and fiscal policy has become more supportive of markets and the trade war threat is receding, all of which should support decent gains for share markets through 2019 as a whole.
Australian Market – ASX200 (6221)
  • The ASX200 came close to meeting primary resistance at 6292 last week, posting a six month high in the process, before retracing some of its gains. With all of the trends pointing upwards, we would expect the XJO to re-test primary resistance in the coming weeks, with a move above positioning the index for a test of quarterly resistance at 6360 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 come back to key support around the psychologically important 6000 level, which also corresponds with the 200DMA and quarterly equilibrium.
  • Financials remain in a long term downtrend and have come back to re-test support at primary equilibrium. Resources are currently testing extended resistance, which needs to be held or risk downside to first extended 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.