ASX200 hits resistance - what comes next?

A G20 draft statement over the weekend that pledged to pay for the distribution of vaccines around the world, reports that “frontline” American workers may receive a virus vaccine by mid-December, and signs that Congressional Democratic leaders would push for a Covid19 relief package before year-end helped the ASX200 to a nine-month high this morning.

Charts (1)

After an almost 11% gain during November, the ASX200 has all but erased all its losses for the year, benefitting from the global rotation away from tech stocks into value stocks including financials, energy, and the resource stocks that are so plentiful in the ASX200.

Also helping the ASX200 higher, a run of better than expected economic data including last week’s jobs report, a trend that is expected to continue into year-end as the Victorian re-opening gains traction.

As well as Australia’s continued success in containing the pandemic in sharp contrast to a worrying uptick in new cases in Asian countries including Japan and Hong Kong and the continued surge in new cases in the U.S.

As regular readers would know, following the break out of the top of its five-month range, our expectation has been for the ASX200 to push higher towards 6800 into year-end. If anything, after this month’s stunning rally, 6800 appears now to be a touch on the conservative side.

For this reason, despite the ASX200 closing in a good layer of horizontal resistance at 6600 and starting to look overbought in the short term according to the RSI indicator, we will resist the urge to take any profits off the table, ahead of a likely pullback into late November/early December.

Instead, we choose to focus on the prospect of a higher ASX200 courtesy of supportive monetary and fiscal policy as well as the imminent arrival of an effective vaccine to power the global economic reopening in 2021.

We would only reconsider the medium-term bullish view on a break and close back below support 6200/6170ish.

ASX200 hits resistance - what comes next?

Source Tradingview. The figures stated areas of the 23rd of November 2020. 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

From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.