The S&P/ASX 200 Index closed down 81 points or nearly 2% lower to 4177 points today. In after hours trading, the index has slipped slightly, with Euro markets pointing to lower opens.
Asian markets followed suit, with Japan’s Nikkei 225 down 1% to 8392 points, the Hang Seng losing 1.93% to 18455 and the Shanghai Composite currently down almost 2% at 2414 points.
In other risk assets, the AUD slipped and is now below parity with the USD, currently at 0.9985, whilst WTI crude, after falling heavily overnight steadied at $98.83 USD a barrel.
Gold was also steady after falling very sharply in the NY/London session overnight and is currently at $1723 USD an ounce or $1722 AUD an ounce.
Movers and Shakers
A red day across the board of the ASX, with all sectors sold off, fairly evenly, although predictably the materials and financials were the worst affected.
The banks were all sold off heavily, with ANZ down 2.5%, Commonwealth (CBA) losing 1.8%, National Australia Bank (NAB) hammered losing nearly 4% and Westpac (WBC) losing over 2%.
Macquarie (MQG) echoed its quasi-retail oligopolitic brethren by losing almost 3%, whilst Cochlear (COH) also fell similarly. Its “twin” CSL also was sold off, losing 2.4% whilst even Telstra (TLS) was hit hard, losing 1.5%
Can you stand some more? Ok, let’s keep going.
BHP Billiton (BHP) was slogged 2.5% back to a 2.5 year low, alongside Rio Tinto (RIO) down 1.5% whilst gold miner Newcrest Mining (NCM) also lost 2%. Not a good day for ASX8 (and hence ASX200) holders.
Fortescue (FMG) remarkably faired the best, only losing 1.2% for the day whilst Woodside Petroleum (WPL) also was relatively unscathed, only losing 0.8%
The Charts
Is the frustration over? Do we finally have some direction? To annoy you all, I’ll say maybe.
To summarise – the ASX200 has failed its short term support, so the short term uptrend is over, whilst the intermediate trend is now under threat, the long term trend – down – is still intact. Remember, you need to view markets through the prism of time, which is different for everybody.
Let’s look at this a bit closer, starting with the daily chart below.
Today’s action closing out the week has seen the lower support level (marked in green) failed, with the next support level at 4150 points – not far away at all. There is an obvious channel forming now between 4350 and 4150 points (and all traders are watching it – I follow many excellent traders on Twitter who have confirmed these “watchpoints”)
For the investor, this means the market is more likely to be sold off once it breaks below 4150 and bid up strongly once it breaks above 4350. Remember, the upside probability of a continuining rally past 4500 points is low, whilst a resumption of the downtrend to 3800 points is higher.
Monthly Chart
Next, I’ve included a monthly chart from my long term study of the ASX200. It includes the trendline from the lows of the last 20 years during the secular bull market (which likely finished in November 2007). After a typical (but wild) bear market rally in 2009, the market has traded in an “upper” range of 4300 to 5000 points.
It has now dropped below the bottom of this structure and has not been able to get “back in the game” above 4300 points, now heading down on a monthly basis for the super long term trendline. Assuming it bounces off, the scenario is for a new trading range (using monthly average prices, not intraday) between 3800 and 4300 points.
If it fails this range again – unlikely, but possible given the amount of stress in debt and currency markets (but I repeat myself) around the world, which lead equity markets – the next support level is the ca. 3100 to 3300 points March 2009 low and several years of volatile sideways movement.
This is all commensurate with typical secular bear markets in terms of magnitude and longevity.