The Momentum Monitor - 18 February 2020
The Momentum Monitor - 18 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.

S&P500 Bullish Trend Looking Exhausted, Met Primary Resistance

Key Ideas:

US Market – SP500 (3380)
  • The S&P500 retested quarterly resistance at 3308 last week before extending higher to a record high after successfully meeting primary resistance at 3376. The index remains in a short and long term uptrend but needs to continue holding this level to extend higher, towards our 2020 yearly risk target at first extended resistance at 3471.
  • However, a failure to hold 3376 could see the index coming back to test key support levels, firstly quarterly support at 3308, then its 50DMA at 3263. A failure here would likely see the index on track to retest quarterly equilibrium at 3112, an ~8% correction. Long term support sits at the 200DMA, currently 3040, with a potential test of primary equilibrium at 2974. This would constitute a ~12% correction, a healthy pullback in recalibrating equity valuations that have become unsustainably high.
Australian Market – ASX200 (7125)
  • The ASX200 has extended higher after successfully meeting and holding primary resistance at 7047 last week. With the short and long term uptrends remaining intact, the index appears well placed to test first extended resistance at 7206. However, were the index to fail to hold primary resistance, it would be at risk of testing key short term support levels, at quarterly resistance and its 50DMA, both around the 6900 level.
  • A failure to hold 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 ~11% correction.
  • Financials have spiked, meeting quarterly resistance, need to sustain this level to continue moving higher or risk coming back to test short term support. Materials have retraced further and broken below the 50DMA, putting the short term uptrend at risk. Will likely test quarterly equilibrium for short term support.

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.