There was a MACD sell signal on the ASX 200 this morning. We have discussed cashing up a bit in the portfolios this morning but decided that this is hardly a Collins Class moment (when Wall Street falls 3% in a night), it is simply a regular short-term loss of the recent very strong upside momentum. No reason to call the top on any more than a short-term basis.
Here is the daily chart the ASX 200 showing the recent RSI sell signal and the MACD sell signal:
The ASX 200 rarely gets overbought on a weekly basis but is very close to being so at the moment and is as overbought as it's been since the top of the market in October last year.
The more interesting observation is that the Australian market, courtesy of a sharp jump in the bank sector on the back of the election result and the resilient performance of the big resources stocks on the back of the iron ore price thanks to Vale’s hiccups getting back into production, our market has had a rare moment of outperformance compared to the US market.
Talk to an Australian fund manager, and they will tell you that the market has numbed to the deterioration in the trade talks, but look at the US market, and they are clearly taking it more seriously. Maybe we should. It was a significant driver for last year's sell-off. This is a weekly chart of the S&P 500 index showing a 6.37% fall in the index in the last month since trade talks started to be doubted.
The observation is that the US market has more clearly peaked than we have thanks to the election and the iron ore price. The election was a sugar hit for the banks (see chart below) that held us up whilst the US was going down, and the iron ore price is as overbought as its been in two years, it is priced for perfection, which is a risk. This is the weekly chart of the iron ore price showing RSI.
This is the weekly chart of the bank sector - the two year downtrend hads been broken:
It is no big deal but the we have had a perfect storm for the Australian market with the election result and the iron ore price and if that wears off we are a bit high and dry compared the US market.
Traders would be excused for taking some profits, although there is nothing yet to disturb investors.