Don’t Buy ASX 200 Yet Watch THIS First | Episode 91

By Jason McIntosh | Published 9 December 2022

Trade the Trend is a weekly video focusing on where the stock market is going. It’s for investors and traders looking for technical analysis of the ASX shares, the ASX200, the SP500, as well as stock markets and commodities markets in general. Jason uses technical analysis of stocks and trend following techniques to help you piece together the world’s biggest puzzle.

Where is the Stock Market Going?

00:00 Intro

00:30 Should you buy the ASX 200 this week?

05:05 This is the latest on gold

07:08 Keep an eye on the big ASX gold stock (it’s getting close)

07:57 Look what silver is doing

08:56 Copper is getting interesting (watch this ETF)

Transcript

Please note: Charts available from video

This video is going to focus on the ASX 200. I’m also going to cover the latest developments in gold, and I’ve got a few other interesting charts for you, so make sure you stick around for those. I’m going to cover the S&P 500 in a separate video, and I’ll leave a link for that in the description section below. As always, this is general commentary. It doesn’t take your personal situation into account. All of that said, let’s get into our first chart.

So, we’re beginning here with the ASX 200. And it remains generally positive, the price action that we’ve been seeing in the local index. When I look at the price action of the ASX 200, it resembles the Dow Jones quite a bit, particularly in terms of the last couple of months. So, we’ve had this strong rally off the September low, and we saw the ASX 200 put in 15% in just a space of a couple of months, so a really strong rally. And like the Dow, the ASX 200 is comfortably above the moving averages. And these moving averages have also been trending higher for several weeks now. Now the 50-day moving average is above the 100-day, which is what you tend to see when a market is in a relatively healthy state. This is the conditions that you get when a market is trending higher. Now it doesn’t necessarily mean the market is going to continue trending but the probability tends to favor the path of least resistance, which in this case has been a rising market.

But as I’ve been saying over the last couple of weeks is that a concern here is the market has gotten away from the moving averages. It’s stretched above it. When that happens, there’s a tendency for the market to want to pause and consolidate, and that allows these moving averages to catch up. And we’ve been seeing a bit of that over the last week. We have seen the AX 200 start to pull back. I think there’s probably more in this pullback than we’ve currently seen. It’s important to remember that a move that lasts for a couple of months and runs 15% will typically take more than one week to correct and consolidate. And the longer the consolidations, usually the better. It just firms up a new base at a higher level and gives the market a chance to breathe, and it makes the rallies more sustainable.

The other factor is this big resistance band. Comes in at around 7200. And also, like the Dow, it’s not a perfect fit. You can see it overshot recently, and there’s other overshoots, say, along the way. But as I keep saying, with technical analysis, it’s not about finding perfect lines and precise points where a market is going to rally or it’s going to fall. Sometimes it’s a bit broader and it’s a bit more general. And we’re looking for regions of activity which could cause a consolidation or a breakthrough or whatever it may be. In this case, we’re looking for potential consolidation. So, that’s what I think we need to continue watching. And as I’ve been saying, I don’t think this is an asymmetric entry point for the ASX 200. If this pullback continues back, we want to see how the pullback continues to develop, and that could lead to new setups which are worth considering.

That said, there’s still individual stocks which are presenting opportunities. And this week, I’ve sent out a few new stocks to members of my Motion Trader service where we are seeing the setups, we’re getting the momentums, we’re getting the breakout. So, for me, at the moment, it’s on a stock-by-stock basis, and it continues to be a market we want to be careful with because we aren’t in an established upward trend. At best, this is an emerging new trend or a basing period, and it’s certainly not up and away. It’s been optimistically long some emerging ideas that maybe those ideas can continue rather than being all-in, equities are going up because we don’t have that evidence. We simply don’t have the evidence to make that assertion at this point in time. So, get exposure, but also have an eye on the exits because we don’t know how this will continue to play out.

Now, I want to move on to gold and have a look at gold now. Well, first of all, though, if you’re getting some value, please hit that like button, and please leave a short comment, just “Hey, thanks for the video.” It tells YouTube people are watching. Makes a big difference for what I do. Hit the subscribe button if you haven’t already, and please come and visit me at Motion Trader. Come and see whether the work I do might be able to help with what you are trying to do with your own portfolio.

And so let’s move on to gold. And it’s been a good week for gold in that the overall structure continues to be positive. But we are starting to see some of that consolidation that I was speaking about last week with gold having recently crossed above its moving averages. And I talked about the possibility that maybe there was room for it to pause and pull back towards the averages. We did have an initial pullback. It was quite brief, and gold ran again. Still think there’s room for a little bit more pause or potentially we push higher. And my concern with gold is that sometimes when gold gets going, there becomes a lot of enthusiasm to get on board, and people have a tendency sometimes to chase a few of the gold stocks a little bit too hard. So, my preference would be to hold fire on adding new positions at the current point.

Hopefully, you’ve already got some positions. We spoke about the breakout a few weeks ago, and I’ve spoken about some gold stocks in these weekly videos, and then, of course, through my Motion Trader service. There’s been plenty of gold signals there. So, hopefully, if you’re interested in gold, you have some positioning already. If not, I think it sometimes pays to restrain our enthusiasm for buying after a run because some of these gold stocks have a habit of then having a decent pullback, maybe a low double-digit pullback or stabilizing, and then having another rally.

So, that said, though, I actually am close to getting some buy signals for some stocks like Evolution and a few other names like it in that look at these moving averages. They’re close to crossing. These moving averages cross and this stock continues to creep higher. I’ll get a buy signal for Evolution which will be the first time for a while we would have had a buy for this particular company. And there are others like it. So, just keep an eye on this space. I think it’s really shaping up in an interesting way. I think there’s a really good medium to a long-term story for gold, gold stocks both technically and fundamentally. So, it’s one of the more interesting areas to keep an eye on at the moment.

And while we’re on the subject of precious metals, a quick look at silver which is also interesting. Spoke about this a couple of weeks ago. And what’s developed since that time is we’ve had another push higher which has taken silver above resistance which is around $22. Compress this a little bit, see this band through here. That was a support which when silver broke down it became resistance. So, silver initially resisted getting through there but it’s broken through $22 now. So, that’s a positive sign. Also, the moving averages have crossed. The 50-day moving average is now above the 100-day moving average. The averages are trending higher. So, silver is looking… The price structure here looks constructive in terms of looking for opportunities in the silver space generally.

And another market I want to have a look at while we’re on the metals is copper. Because there seems to be this general theme going across the metal space generally. Now, what’s interesting with this, let’s compress this data a bit. Firstly, let’s start by putting on some Fibonaccis because we had this big rally as you might remember. What was it? A year or so ago up around…and had for a year, and a lot of enthusiasm to get on board, particularly as it was getting near the top as often happens, the most enthusiasm is near the top. But big up moves often lead to big consolidations and corrections, and that’s what’s played out. It’s now been a case of being patient and waiting for that to play itself through.

Now just putting on these Fibonacci retracements. I’m going to use this as the high point because I think that was the end of the initial move. When you use that, you can see the markets come almost back to the 61.8% retracement and started to rally. Interesting if you use… Some people would use this as the high point. When you use that as the high point, you can see the markets come exactly to the 61.8%. Doesn’t really matter which one you use, you get the same impression of a nicely proportioned rally and correction.

And so let’s just remove that. Looks to me like… This looks like a basing formation we’ve had through here. Well, this is a nice rounding base that we saw between September, say November, after this big sell-off that we had earlier in the year taking through to the July low. Now we seem to be rounding higher. First step, we had this breakout here. We had a break above resistance through here at $3, around $3.55-ish, a rally up towards this resistance point. Just compress that. You can see this has been a resistance area. There’s several touches of this region, and that comes in at around $4. Pullback, and now we’re up retesting it. Really interesting to watch how this develops. Haven’t broken through it yet. Maybe it’s a case that copper will hit this scenario of a pullback in gold, plays through. Maybe this would result in copper starting to coil between this resistance area and this support, for example. Not a prediction, but just an example of a possibility we could get some sort of a coiling pattern, and then from there, you get your break. Something like that could happen. That’s the price action I’d like to be watching out for because that could provide a good setup, but we just need to wait and see how it does play out. The moving averages are close to crossing. haven’t quite crossed yet, but they’ve turned higher, they’re moving upwards. That would be another positive. And the copper price is above the moving averages, which is another positive.

So, how do you play copper? Well, I think a really interesting way to play copper is through an ETF. Plenty of copper stocks, and I cover those through the Motion Trader service with the signals I give. But looking at a copper ETF, this is the Global X Copper Miners ETF. This is the U.S.-based ETF, so you got to go through the NYSE to invest in this one. But what’s interesting is only in the last couple of weeks, Global X have released an ASX-listed ETF. The ticker code is, WIRE, W-I-R-E. My understanding is it’s the same fund, but it’s just over the access through the ASX. Check it out if you’re interested in copper plays and you like the idea of this Global X approach to it.

So, this is interesting in that just in the last couple of months, we’ve broken through this resistance area, this resistance around 3340-ish. The moving average have already crossed, so it’s leading the copper price. And also, if you remember the copper price, copper hasn’t broken through its resistance yet, and it’s trading below its November high. Going back to the Global X fund, it’s already above its November high. It’s made a new high. So, the copper stocks are leading the metal. I’d prefer it the other way around. So, I would be just watching at the moment for the opportunity to get in. I don’t know that I want to chase the stocks before the mental breaks upwards. But you can see there’s potentially an opportunity coming into play. The big move, the big consolidation, the correction, and now it looks like we’re based and we’re starting to turn. So, maybe this is an area which is going to be worth keeping a close eye on. Really interesting what opportunities are turning up.

So, let’s leave it there for this week. Hopefully, that was interesting. I hope you got some new ideas from that. Thank you for joining me. Look forward to talking to you again next week.

Please see video for more details analysis and charts

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