Australia: S&P/ASX 200 (.AXJO) set to drop following overseas markets

Australia: S&P/ASX 200 (.AXJO) set to drop following overseas markets

Australia: S&P/ASX 200 (.AXJO) set to drop following overseas markets

Australian shares are set to drop, following overseas markets, as investors continue to reprice equities with the number of confirmed cases of the coronavirus outside of China expected to rise ever higher this week.

ASX futures were down 93 points or 1.5 per cent to 6113. The local currency edged higher.

On Wall Street, a late rally on Friday in New York helped pare losses. The Dow ended down 1 per cent; at one point during the session, the Dow was more than 3 per cent lower. The S&P 500 fell 1.7 per cent and the Nasdaq dropped 1.9 per cent.

The major move though came in the US Treasuries market where a buying spree drove the yield on the US 10-year note to a record low of 0.66 per cent. The yield ended down 15 basis points on the day to 0.76 per cent, narrowing the gap with its Australian counterpart to nine basis points.

In its Friday situation report, the World Health Organisation had the virus active in 88 countries. According to a tally by Johns Hopkins University, nearly 102,000 people have caught the virus so far with the death toll approaching 3500.

As far as Oxford Economics is concerned, global growth is poised to fall to post-financial crisis low.

“We now expect global GDP growth to slow to 2.0 per cent this year – its weakest since the global financial crisis and down from 2.6 per cent in 2019 – before picking up to 3 per cent in 2021.”

In terms of the outlook for the US economy, Oxford has lifted its odds of a recession to 35 per cent from 25 per cent.

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 6,733.11.

The projected upper bound is: 6,412.83.

The projected lower bound is: 5,996.82.

The projected closing price is: 6,204.82.

Candlesticks

A black body occurred (because prices closed lower than they opened).
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 28 white candles and 22 black candles for a net of 6 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 19.1643. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 2 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 21.91. 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 30 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 -101.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 1 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 9 period(s) ago.

Rex Takasugi – TD Profile

S&P/ASX 200 closed down -179.500 at 6,216.200. Volume was 49% above average (neutral) and Bollinger Bands were 295% wider than normal.

Open     High      Low     Close     Volume___
6,395.7006,395.7006,216.2006,216.200 959,368,128
Technical Outlook 
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 6,541.66 6,891.96 6,711.63
Volatility: 26 20 16
Volume: 1,089,455,488 666,141,248 646,970,560

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 7.4% 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 7 periods. Our momentum oscillator is currently indicating that .AXJO is currently in an oversold condition. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.

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