ASX200 hits resistance - what comes next?
Tony Sycamore November 23, 2020 3:40 AM
A G20 draft statement over the weekend that pledged to pay for the distribution of vaccines around the world, reports that “frontline” American workers may receive a virus vaccine by mid-December, and signs that Congressional Democratic leaders would push for a Covid19 relief package before year-end helped the ASX200 to a nine-month high this morning.
After an almost 11% gain during November, the ASX200 has all but erased all its losses for the year, benefitting from the global rotation away from tech stocks into value stocks including financials, energy, and the resource stocks that are so plentiful in the ASX200.
Also helping the ASX200 higher, a run of better than expected economic data including last week’s jobs report, a trend that is expected to continue into year-end as the Victorian re-opening gains traction.
As well as Australia’s continued success in containing the pandemic in sharp contrast to a worrying uptick in new cases in Asian countries including Japan and Hong Kong and the continued surge in new cases in the U.S.
As regular readers would know, following the break out of the top of its five-month range, our expectation has been for the ASX200 to push higher towards 6800 into year-end. If anything, after this month’s stunning rally, 6800 appears now to be a touch on the conservative side.
For this reason, despite the ASX200 closing in a good layer of horizontal resistance at 6600 and starting to look overbought in the short term according to the RSI indicator, we will resist the urge to take any profits off the table, ahead of a likely pullback into late November/early December.
Instead, we choose to focus on the prospect of a higher ASX200 courtesy of supportive monetary and fiscal policy as well as the imminent arrival of an effective vaccine to power the global economic reopening in 2021.
We would only reconsider the medium-term bullish view on a break and close back below support 6200/6170ish.
Source Tradingview. The figures stated areas of the 23rd of November 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.