For the everyday investor and trader committed to growth
  • Home
  • Contact

Crush The Market

Aussie Stocks Set To Fall Further As They Hit A Double Top & Headwinds

5/31/2017

0 Comments

 
The top 200 largest stock index in Australia (XJO200) has run into long term resistance in May as it failed to breach the 5925 level. After hitting the resistance level late April and early May the XJO index has fallen around 200 points from the recent high of 5925.

Since forming a double top and confirming the reversal lower in May, the XJO index of the top 200 largest stocks is set to continue to fall further as it takes a breather from the recent strong run over the last 12 months. The road ahead for the index isnt clear as a number of major headwinds are approaching making further gains difficult.

Monthly Chart Review

Can The XJO Breakout Of The 5925 Resistance Level?

From a number of technical indicators the XJO index is likely to pause from its recent strong rally higher as it runs into some exhaustion within its uptrend.

Since the the XJO index is in a uptrend that has been running for a number of years as shown in the chart below, its likely that the index will head lower towards its long term uptrend around the 5525 which is its first level of support. If the index continues on its reversal lower towards support it could be several months before we see the chance for the index to make another run higher towards 5925.

XJO Headwinds - Potential For A Break Of Long Term Uptrend

The momentum indicators are supporting a move lower over the next few months leading into earnings season in Australia. In addition the slow stochastic is approaching its peak upper level on the monthly chart and about to cross lower. If the slow stochastic crosses over like it did back in March 2015 (See chart below), we would most likely see considerable correction in the XJO index over a 12+month period resulting in a break of if its long term uptrend. If this was to occur the only thing that could potentially reverse the move lower would be consecutive drops in interest rates by the RBA and or Government stimulus.

Picture
Australia's Macro Headwinds Could End The Long Term Uptrend

The other headwind facing Aussie stocks for the remainder of the year and 2018, comes from the macro picture in Australia, as the slowdown of the real estate market has begun with prices starting to fall in Sydney and Melbourne in May (See article below). The property boom up until recently has been driving the economy and a large part of the GDP growth. However this appears to be over as a number of interest rates from the banks, has finally stopped the strong real estate growth in prices. Together with construction boom spending now falling as the banks continue to tighten lending standards likely to slow the economy as well.

Below is a few recent articles outlining the headwinds stocks, real estate and the economy are facing over the coming months.
Picture
Click image for article source: afr.com.au - Subscription required
Picture
Click image for article source: afr.com.au - Subscription required
Picture
Click image for article source: afr.com.au - Subscription required
Picture
Click image for article source: afr.com.au - Subscription required
Weekly Chart Review

The weekly chart of the XJO shows a similar story to the monthly chart, with the index making a double top as well as the momentum indicators falling as the buying spree reaches exhaustion within the XJO index.

The only difference with the momentum indicators is that momentum has turned negative sitting at -62.2 and the slow stochastic has turned several weeks ago and looks to continue to move lower of the next  few weeks.

On the weekly chart I would look out for a pull back in prices, potentially to the target area drawn on the chart around support of 5570. The key to watch is if the XJO index breaks down further closing below the blue uptrend line on the weekly chart.

If the weekly uptrend (blue line within target area) is broken all bets are off as we could see a move down all the way to around 5000 over the next few months.

Add in the earnings season which starts in late July, there is potential for a lot more volatility over the next 3 months.
Picture
Remember to share this with your friends by clicking on the Facebook & Twitter Icon's Below.

Make sure you Subscribe to Crush The Market - Choosing from the 4 options: 

Email - Subscribe at bottom of page.   OR

Facebook, Twitter or RSS Feed on the top right side toolbar for latest posts and market updates.

If you would like to view my most recent macro article on the US economy click the link below:

Rising Rates About To Crack The US Economy Under Record Debt Levels

To view my most recent Stock review  click the link below:

Telstra Goes From Bad To Terrible As It Closes Below Long Term Support

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
0 Comments
    Tweets by crushthemarket
    Subscribe Below
    Via Social Icons

    Archives

    April 2020
    February 2020
    November 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    December 2018
    August 2018
    January 2018
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016

    Categories

    All
    AUS Economy
    AUS Stocks
    China Economy
    Commodities
    ECB
    EU
    EU Companies
    FED
    Forex
    Investing
    Markets
    Pension Funds
    Property
    Superannuation
    Technology
    Trading
    US Economy
    US Stocks

    Author

    I am a private trader and equities investor that loves the trading and investing world, following the markets and everything in between.

Proudly powered by Weebly
Photo used under Creative Commons from okchomeseller
  • Home
  • Contact