We’ve been monitoring the potential for an inflection point on the S&P/ASX 200 for the past couple of weeks and it appears cracks are now appearing at recent highs. There’s no denying it remains within a long-term uptrend trend on the weekly chart, as it trades within an established bullish channel. Yet this channel allows for some large swings, and a lower high in September is just one clue that the downside beckons.
The lower indicator measures the % distance from its 52-week high or low. Historically, rallies around 25-30% from the 52-week low have triggered a sizable correction, a threshold, which was achieved at this year’s high. Furthermore, five bullish weeks were seen ahead of a spinning top doji and, itself a candidate for a swing high. As price action has now breached the doji low, it further suggests a top is in on the weekly chart.
Switching to the daily chart has seen a bearish break of a bullish channel. And not only was this bearish outside day its worst session in 7-weeks, but it opened at the high and closed at the low to produce a bearish Marabuzo candle. One method to use such elongated candles is to simply measure the 50% of its range to use as an invalidation point if it is crossed. And yesterday’s candle has also formed a lower high ahead of the breakout.
- Whilst prices closed beneath 6,660 support, the 50-day average is providing support for now.
- Given the bearish clues overall, we remain bearish on the daily chart below 6743.7. However, the 50% Marabuzo line can be used to invalidate the bias, if a more aggressive approach is preferred.
- A break beneath the 50-day eMA could suggest the downside is to continue, and bears could target the base of the channel just above the 6,400 and use 6,500 as an interim target.
- Due to the mean reversion potential of the weekly chart, we’ll continue to monitor its potential for a much larger breakdown as price action unfolds.