Travelling Technicals with Global Indices: ASX 200

Welcome back to another edition of Travelling Technicals where every week I take a well known international equity index and use technical analysis to forecast what movements we could be expecting in the weeks and months to come. Today we are going to be looking at the ASX 200 which represents the 200 largest companies listed on the Australian Stock Exchange by market capitalisation.

According to website Market Index the top 10 Biggest stocks on the ASX 200 are:

1. Commonwealth Bank of Australia 
2. Westpac Bank Corporation
3. Australia and New Zealand Banking Group
4. National Australia Bank
5.  Telstra Corporation
6. CSL Limited
7. BHP Billiton 
8. Wesfarmers Limited
9. Woolworths Limited
10. Macquarie Group Limited 

It's safe to say that financial services make up a sizable chunk of the constituents making up the ASX 200 with 48.8% followed by Materials which involve that of mining coming in at 11.9%. With the global commodities rout having been firmly in place for a while now we can expect to see a grim picture being painted for the index. Although mining only makes up a smaller weight of the index the economy is reliant on that part of the economy to create jobs, something which became evident with the boom and subsequent bust pertaining to the Financial Crisis. 

Based on Information found on S&P Dow Jones Indices-McGraw Hill Financial

Let's get charting: 

Monthly

The index has performed very well from the lows of 2009 but the latest pullback we've seen happening from 2015 when it reached multi year highs has left a cloud over whether it has the ability to return to all time highs and test its strength at those levels. The level of 6000 does seem to have marked the line of polarity with the first time it being surpassed an exhaustive rally taking place followed by the successful break downwards that ultimately led to a collapse after a prolonged period of market gains. 

It came into play again with very strong resistance that reinforces the notion that the bulls have become weak and not able to take things higher. 

We haven't seen a steady start to 2016 which does place the long term trend line in jeopardy of breaking. The price is grinding along the uptrend, a similar situation we saw last week on the Global Dow as well as the fact the price is also underneath the 50 SMA. The RSI, an indicator of momentum is seemingly turning bearish with a retest of the 50 mark and turning downwards shifting things in favour of the bears. If the trendline breaks I would expect to see a quick move materialising. 

Weekly

The price has been stuck between the 50 SMA (Yellow Line) and the 200 SMA (Blue Line) for a while now with the most notable point being August 2015 when the price touched the 200 SMA for the first time since November 2012. Price however didn't simply collapse and we've seen choppy action ensue as market participants make up their minds over whether the best returns might be find in better markets. 

I've marked four points that I thought were of interest to me, the first set being represented by the pink circle when price broke below the 50 SMA and 50 was rejected on the RSI. We had the same thing occur when the RSI attempted to break above the 50 after breaking down on the 200 SMA but a clearly rejection once again. These points I marked with a lime green circle.  

It does suggest a good degree of weakness currently being felt within the ASX 200 which doesn't surprise me much since its close ties to China has meant that its economy has shrunk significantly as trade between the countries have dramatically dropped over the past year. I think the key level here is going to be 4900, if that level can be taken out convincingly there's a chance we'll see fresh lows being put so I would put that level on my radar screen. 

That wraps up another exciting edition of Travelling Technicals for this week, be sure to catch us next week where I'll be charting the Bovespa of Brazil , a country that seems to be in a spot of trouble and facing political anarchy at the moment so it will be interesting to see how that's weighed up on financial markets that side. 

Remember your input is valuable to me and much appreciated so if you have any questions send them through to cadetrader@gmail.com and I'll gladly get back to you or even if you'd like to discuss financial markets from a different point of view I always like seeing things in various perspective. Till next week folks!!!