Thursday, 7 June 2012

ASX 200 the 4200 zone is key

Earlier today I tweeted " ASX 200 inability to rally following good jobs data is a sign of weakness. May change my tune if (IF) > 4200 is seen. ". Why is the 4200 zone key?

Firstly, 4200 is the current level of the 40 week moving average, an indicator which has been a good guide to the trend (if any) of the ASX 200 for the past decade, as shown on the following chart, and indeed since long before that. To retain confidence in the fledging down trend taking flight, the market needs to push downward through the trend line drawn from the 2009 low, and do so while remaining under the 40 week moving average.

Secondly, at 4210 lies the Fibo 50% retracement of the decline from the May high, at 4210, as shown on the following 4-hour candlestick chart. Trending moves are often followed by corrections in to the Fibo zone (38.2% to 61.8% retracement) before the trend resumes. Can't help but mention, what a beautiful 5 wave move down from the May high, which in Elliott Wave terms defines the trend as down. No labels, but easy to see.

Gold consolidates above trend line

So long as Gold remains above the trend line, the path of least resistance is up. The 40 and 18 day moving averages have provided a good risk management tool for Gold in the past. Now that Gold is above the 40, it needs to stay there if the fledging up trend is to take flight. A bullish cross by the 18 through the 40 would add confidence to the bullish case.

EUR/USD approaching potential resistance at January low

USD/JPY testing daily chart trend line