ASX200 pops to new cycle highs

In an article two days before year-end, it was noted for the first time in almost a decade, the ASX200 was set to finish the year without a “Christmas rally”. An unusual end to an extremely unusual year.

Charts (1)

While it could be argued that the ASX200’s 10% rally in November was an early Christmas present/rally, it merely enabled the ASX200 to finish the year near to where it started. A relief to those who sat tight during a 40% plunge during the first quarter. But lacking in comparison to the recovery in other global equity markets.

The start of 2021 has started on a brighter note. The Sydney COVID-19 clusters that emerged before Christmas have been bought under control. The Democrat's win in the Georgia Senate runoff bought with it a promise of even more stimulus as well as a plan to enact a massive wave of infrastructure spending, possibly in the order of $2-$3trillion.

Reinforcing the idea that the incoming Biden administration is prepared to splash the cash, testimony overnight from nominee Treasury Secretary Janet Yellen. Yellen urged lawmakers to “act big” on their next relief package and that the benefits of this would far outweigh the negatives associated with a higher debt burden.

A combination of factors, expected to provide continued support for equities, helping the local bourse, the ASX200 pop above the top of a 6-week range earlier today.

From a technical perspective, the break above 6765, if confirmed on a closing basis would open the way for the ASX200 to push towards the next upside target coming in at 6900/7000. Above here, the next upside target is the pre-COVID-19 high of 7197.

After trimming an overweight long position at the end of last year, a core long position in the ASX200 was retained, which we are determined to stay with. Dips back into a band of support 6600/6500 will be looked at closely as a buying opportunity to add to core longs.

Learn more about trading indices

ASX200 pops to new cycle highs Source Tradingview. The figures stated areas of the 20th of January 2021. 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

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (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.

For further details see our full non-independent research disclaimer and quarterly summary.