Tuesday, 29 March 2016

ASX 200 breaks trend channel support, Big 4 bank monthlies suggest decline has long way to go

Today the ASX 200 (all sessions) broke below short term trend channel support. Daily chart:

Stepping back next to look at the big picture. The Big 4 banks make up a large chunk of the ASX 200 index, and they have been leading the market lower since last year's peak. The monthly charts for each bank suggests that their decline has further to run, and therefore the ASX 200 decline has further to run.

ANZ has lead the charge lower, it's share price is the weakest of the Big 4, and this month has resumed violently lower following a brief test of the down trend line.

CBA is now below key trend line support. Another monthly close below that support would suggest that a fresh wave of selling is just beginning. Let's see. I could easily label a Head and Shoulders top on this chart, but haven't. You can see it, can't you?

NAB. Below trend channel support.

WBC testing trend channel support, showing a possible Head and Shoulders top.

Further weakness in bank stocks would support the idea that the ASX 200 needs a big wave C lower to complete the correction from the 2007 high, as illustrated below. Let's see.