S&P/ASX 200 Holds Steady Following Tuesday’s Pullback

The benchmark S&P/ASX 200 Index was little changed today, stabilizing after Tuesday’s pullback from Monday’s new rally high. The Index ended the session up 0.19% at 5771.5. The market was boosted today by a rally in metals and mining stocks. The ASX has started off the year on a positive note and is currently up 1.9% from the 2016 close.

The last major market low was established at the time of the election of Donald Trump as President of the U.S. He will have his first official press conference since being elected in November today at 11:00 ET. Trump is expected to repeat his pledges of ramping up spending and cutting corporate taxes, but it is open to question whether he will reveal any specifics on policies.

As a result of the advance from the November low, the ASX produced a breakout above the early August 2016 high. This was a significant bullish development, as the move resumed the broader uptrend dating to the February 2016 corrective bottom. With the extension of the advance in 2017, the Index has surpassed the next upside target at the early August 2015 high at 5727.7.

At present, the longer-term target is a return to the 2015 highs near 6,000. Ahead of this high, another level of resistance stands at the late May 2015 high near the 5800 level.

Short term, however, the Index is overbought and produced a bearish candlestick signal, a dark cloud cover, as a result of Tuesday’s move to the downside. Therefore, a period of correction or at least consolidation could develop over the near term.

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The Index is currently testing the rising trendline which defines the advance from the December 16th low. A drop below this trendline over the near term could elicit some selling.

On the downside, below the trendline, support may come into play at the 5700 level, followed by 5665. Key support is at former resistance at the August high at 5611. Holding this level during a period of correction would keep the broader uptrend in the Index firmly intact.

A decline below this key level of support is not expected to play out in reaction to the current overbought condition, given the broader bullish bias in the Index.

S&P/ASX 200 Daily/Weekly Charts

ASX_011117

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Tracy L. Morganthall, CMT, has been a Technical Market Analyst for more than 20 years. She has experience analyzing and producing reports on equities, both domestic and international markets, as well as Forex and commodities. She attended Trenton State College in Trenton, New Jersey, earning a Bachelor's in Finance.