Home Stocks Australia Australia: S&P/ASX 200 (.AXJO) crashes below 6,000 with almost $140b wiped off...

Australia: S&P/ASX 200 (.AXJO) crashes below 6,000 with almost $140b wiped off in worst day since global financial crisis

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Sydney, Australia - August 7, 2017: Boats and ferries ply the waters of Circular Quay in Sydney, Australia. The iconic form of the Sydney Opera House and the Royal Botanic Gardens beyond complete the scene.

Australia: S&P/ASX 200 (.AXJO) crashes below 6,000 with almost $140b wiped off in worst day since global financial crisis

The Australian share market has lost almost $140 billion in Monday’s trade, amid the economic fallout from the coronavirus and an oil price war.

At the same time, the Australian dollar briefly tumbled to just above 63 US cents — the lowest level since the global financial crisis — in what currency strategists have called a “flash crash”.

Overall, it has been the worst day of trade since October 2008, when the GFC took a turn for the worse, and the rout is hammering share portfolios and superannuation balances.

The share market tumbled more than 5 per cent in early trade but plummeted again over lunchtime.

But stocks tumbled further at the close with the ASX 200 index losing 7.3 per cent or 456 points to close at 5,761.

That is a paper loss on Monday of $137 billion, with $413 billion lost since the market’s record high on February 20 of 7,197.

The All Ordinaries index plummeted by 7.4 per cent or 465 points to end at 5,822.

Flash crash’ sees Australian dollar plummet

A “flash crash” is a fall caused often by technical issues. It can deepen losses because of the widespread use of computer generated trading across global share markets.

The Aussie dollar is falling because China, Australia’s major trading partner, is at the epicentre of the coronavirus outbreak which has the global supply of products and services used by industry and consumers.

It is also falling because the Reserve Bank is expected to further cut interest rates to help boost the ailing economy.

Australia’s economy is taking a multi-billion dollar hit from both the coronavirus and the bushfires. The RBA cut official rates to a new record low of 0.5 per cent last week.

Treasurer Josh Frydenberg worked to dampen fears about the market plunge, saying volatility was not uncommon.

“As you will be aware, there are many factors behind movements in equity markets,” he said.

“And I note that some announcements by the Russians and the Saudis in relation to oil overnight, and we’ve seen a steep drop in the oil price in recent weeks.

“So there are a number of factors at play when it comes to the equity markets, but our financial system remains strong, our economy remains strong.

“This is a very different situation to what we saw through the GFC, which was essentially, a problem with the banking and the financial system and issues of liquidity.

“We haven’t seen those same problems in relation to this health crisis. What we have seen is a supply and demand side constraints, and that’s where our [stimulus] package will be focused.”

The ASX 200 is now at the lowest since January 2019, the quickest correction on record.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 6,671.13.

The projected upper bound is: 6,019.09.

The projected lower bound is: 5,460.76.

The projected closing price is: 5,739.93.

Candlesticks

A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 10.1381. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 3 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 14.86. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 31 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -151.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 2 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 10 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -455.600 at 5,760.600. Volume was 122% above average (neutral) and Bollinger Bands were 359% wider than normal.

Open     High      Low     Close     Volume___
6,216.2006,216.2005,760.6005,760.6001,444,304,768
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 6,419.89 6,871.29 6,708.17
Volatility: 44 28 19
Volume: 1,152,602,496 690,990,592 652,008,768

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

S&P/ASX 200 is currently 14.1% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .AXJO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .AXJO and have had this outlook for the last 8 periods. Our momentum oscillator is currently indicating that .AXJO is currently in an oversold condition.

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