Trader’s Update


Here is a Friday update from John on how he sees the very short term movements of the Australian Sharemarket currently. Please remember the great Disclaimer –

none of this information is to be considered personal advice, and you MUST NOT take any action based on this post without first verifying that it is appropriate to your personal circumstances. Clearly, there are so many inputs and variables in any consideration of broad market movements that it is impossible for such analysis to take into account all of the specifics that relate to your personal financial position, preferences and objectives. Personal advice can only be provided by an accredited financial planner who has made appropriate investigation into your personal position.

Ok… enough of the compliance and continuous Statement of the Obvious… Here is John’s quick note:

Technical analysis provides that once having passed upwards through a ‘resistance level’ (in this case, the 4800 level on the S&P/ASX 200 Price Index), the market needs to retest that level and hold above it (4800) before the relevant index can move higher.

Daily movements of the S&P/ASX 200 index

A look at some of the trendlines that can be extracted from recent price changes

So far, this weeks market moves have done just that and if correct, it is likely that we will see a lift in the market next week.

From a Multiple Moving Average (on charts this is shown as “MMA”) perspective, the traders (who tend to influence price movements as shown by the blue lines) appear to have again used uncertain world economic news to trade out – but they do not appear to want to remain out of the market for too long, and it can be seen that the traders’ lines (blue) quickly move back into the long-term trend of the broader market (reflected in the red lines).

Short term trends in the S&P/ASX 200 Price Index

The 'traders' buy in, take profits but are trading around the longer term trends (red lines)

Again, it must be stressed that this is just one market indicator (for example, you could look at the Metals & Mining index XMM, the Financials index XFJ or the Listed Property index XPJ), and we are looking at very short term trends. There is also the interplay of the currency markets, fixed interest, income and debt markets – and the ongoing trends of the residential property market (which is roughly twice the size of the listed sharemarket) that make any such analysis quite complex. However, the objective of these notes and posts is to try to shed some light on the daily gyrations of millions of buying and selling transaction decisions on the one part of a portfolio that most people understand the least.


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