ASX 200 Has Done THIS Before | Stock Market Technical Analysis | Episode 257

By Jason McIntosh | 26 October 2024

ASX 200 Hits New All-Time High: Understanding Market Pullbacks and Trends

The Australian Securities Exchange (ASX) 200 recently reached a new all-time high, sparking both excitement and concern among investors. As we analyze this milestone, it’s crucial to understand market pullbacks and their role in ongoing trends.

The Nature of Market Pullbacks

When the ASX 200 hits a new high and subsequently pulls back, it’s natural for investors to worry about a potential market top. However, history shows that these pullbacks are often temporary pauses within an ongoing uptrend.Looking at the ASX 200 chart, we can observe several pullbacks throughout the year:

1. A five-month sideways trading period from April to July
2. Shorter, sharper pullbacks like the one in August

Despite their varying durations and magnitudes, these pullbacks have consistently been temporary pauses in the overall upward trend.

The Wall of Worry

There’s a saying in financial markets: “Markets climb a wall of worry.” This adage reflects the constant concern that each market peak could be the one where a significant reversal occurs. While it’s true that markets eventually peak, predicting which peak will be the last is challenging.

Analyzing the Current Market Structure

When assessing the ASX 200’s current position, several factors suggest a bullish outlook:

1. Rising 50-day and 100-day moving averages
2. Price remaining above these moving averages
3. A series of higher highs and higher lows

These indicators support viewing the market as bullish, despite recent pullbacks.

Consolidation Patterns

The quick reversal following October’s rally suggests more consolidation may be on the horizon. One possible scenario is sideways consolidation above support levels, around 8,100 points, which coincides with the 50-day moving average.This pattern of rallying and then pulling back towards moving averages is common in bull markets, as seen in the 2020 bull market.

Equal-Weight ASX 200 Perspective

Examining the ASX 200 on an equal-weight basis provides additional insights:

• The index gained about 10% in just over five weeks
• This rapid gain exceeds the average yearly move
• Such a swift advance often leads to a pullback

A similar pattern occurred in January, following a 14% gain from October to December.

Maintaining a Bullish Outlook

When analyzing pullbacks, it’s essential to consider the underlying framework:

1. Direction of moving averages
2. Price position relative to moving averages

Currently, the ASX 200 shows rising moving averages with the price above them, indicating a bullish trend.

Investment Strategy

Given the current market conditions, a long-sided approach remains favorable. Using wide trailing stops can help investors navigate inevitable pullbacks while maintaining exposure to the overall uptrend. In conclusion, while market pullbacks can be unsettling, they are a normal part of bull markets.

By understanding these patterns and maintaining a broader perspective, investors can make more informed decisions in the face of short-term market fluctuations.ws signs of a robust and sustainable uptrend. However, as always, investors should remain vigilant and be prepared for normal market fluctuations within this broader positive trend.

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ASX Strategy Session Video

00:00 Intro

00:30 ASX 200 sets-up a familiar pattern (get ready)

02:05 Many investors struggle with this unnecessarily

03:15 Don’t lose sight of what matters most

04:30 This week’s selloff suggests THIS happens next

05:15 Look what the ASX Equal Weight just did

08:15 This is question I always ask myself (you should too)

Strategy Session Member Content (Get access here)

[09:00] Small Ords uninterrupted rally ends (what’s about to happen)

[10:30] This is how I make money when I’m wrong

[14:07] Do you know this surprising fact about gold?

[19:50] This is odd: Gold investors should be aware

[23:25] Copper investors should consider doing this

[25:40] When is it time to buy oil?

[26:14] This is what I’m doing in uranium

[30:00] Stock 1: Down-and-out ETF with great risk/reward potential

[33:00] Stock 2: I just bought this speculative stock (it’s breaking out now)

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 stocks, 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.