Thursday, 19 April 2012

ASX 200 the bearish evidence

As I wrote over at MB a little while ago, despite today's display of strength by the ASX 200, featuring the highest close for the past six months, there are many arguments in favour of the bearish case for the months ahead. This post lists five of those arguments, and provides illustrations
1) The ASX 200 spends most of the time closely correlated to US and European equity indexes, once you take currency fluctuations in to account. The European indexes are trending down, at least on the daily charts, if not yet the weeklies, as are many of the US indexes.

The strongest major European market during the recent bullish period was the German DAX. It is now trending down.

The strongest major US index during the recent bullish period was the NASDAQ 100. It is now trending down.

2) Cash ASX 200 made a potential double top today. The April 2 high was 4377.5, which is currently the high for 2012. Today’s high was 4377.1.

3) Six month closing high is correct, but the market still hasn’t made a new high above the October 28 intraday high at 4418.

The following chart illustrates points 2 and 3.

4) If you take after hours trading in to account, the number to beat is 4438 from late October, which coincides with resistance from the June and July lows.

5) Last but not least, there is a clear down trend channel on the long term chart. There is no upwards break from the channel til the ASX 200 goes over 4550ish.

I don’t usually talk about my trading or positions, but for what it’s worth, I went short the ASX 200 near the close today. Risking 1/5 of my standard amount, so no biggie if I get stopped.  

Usual disclaimer: none of the above is advice. Full version here.