Thursday, 6 August 2015

ASX 200 slices through trend line support. Time for a "headed below 3000" t-shirt?

Today on Twitter I blew off some steam by tweeting "I think the #ASX 200 will go below 3000 before end of 2016. Might get some t-shirts printed? #xjo", including a mock up of such a t-shirt, shown below. Needless to say, I don't have a crystal ball, and the market couldn't care less what I think, but let's look at the evidence on the daily, weekly, and monthly charts. All charts include after hours trade.

Daily chart shows the ASX 200 today slicing through short term trend line support, following a rebound lower from the test of trend line resistance. Bearish divergence on the MACDH warned of the turn lower and warns of further weakness.

Weekly chart next. The new weakness clearly beginning on the daily chart could lead to a test and break of weekly chart trend line support. I believe the odds favour this outcome. The market has clearly finished a 5 wave advance from the late 2011 low, and at the very least needs to correct this advance, a process which is unlikely to be complete at this time, given that the peak of wave 5 was so recent.

Finally the Monthly chart, which shows that a break lower through the illustrated trend line supports would confirm the beginning of wave C lower to below the 2009 low. I believe that the odds favour this outcome. We'll see.