The Momentum Monitor - 11 February 2020
The Momentum Monitor - 11 February 2020

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 Client Portal.

Coronavirus to Impact Nascent Global Economic Recovery

Key Ideas:

US Market – SP500 (3328)

  • The S&P500 found support at its 50DMA last week, bouncing off this level and regaining quarterly resistance at 3308. Primary resistance at 3376 remains a key level for the index over coming weeks and months. A successful test and hold of this level would be bullish, however a failure to break above this level could see the index stall in the short to medium term.
  • A failure to hold the 50DMA would put the index at risk of entering a short term downtrend, which would be confirmed by a break of quarterly equilibrium at 3112. Long term support sits at the 200DMA, currently 3028, with a potential test of primary equilibrium at 2974. This would constitute a ~10% correction, which would represent a healthy pullback in recalibrating equity valuations that have become unsustainably high. Our risk target for the S&P500 in 2020 is 3471, at first extended resistance.
Australian Market – ASX200 (7013)
  • The ASX200 bounced off quarterly resistance at 6894 last week, bouncing off this level and recovering the psychologically important 7000 level in the process. The index has now met and is testing primary resistance once again at 7047. Were the index to hold above this level it would be short term bullish, with upside to first extended resistance at 7206. However, a failure to retake this level could see the index come back to re-test support at quarterly resistance and its 50DMA.
  • A break of the 50DMA would put the short term uptrend at risk, implying a test of quarterly equilibrium at 6684. Quarterly equilibrium also corresponds to the key long term support level, the 200DMA, with a failure likely to see the index testing primary equilibrium, the long term inflection point, at 6377. If this level is reached it would correspond with a ~10% correction.
  • Financials continue to track sideways but remain in a short and long term uptrend for now, although they risk failing to hold the 200DMA. Materials have come close to testing quarterly equilibrium, but have bounced although have yet to reconfirm their short term uptrend by recovering the 50DMA.
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.