Originally published by AxiTrader
Earlier this week I wrote that the ASX, and the SPI 200, were under pressure and likely to trade lower after an important rejection of long-term overhead resistance with last week's high.
I suggested a target into the 5482/98 region as a "simple garden variety Fibonacci retracement that we see repeated in many markets and timeframes often and for as long as markets have existed".
While that move is yet to come to pass the price action today, and a couple of broker downgrades of the ASX massive banking sector component, have put the market under pressure once again.
Specifically, Citbank analysts have downgraded the shares of both Westpac and the Commonwealth bank to a sell. Likewise, Macquarie bank has outlined 5 reasons why the rally for Australian banks shares will run out of steam.
And here is a look at the near term technicals based on AxiTraders SPI 200 CFD - please note this is the drilled in daily chart which doesn't show the rejection of the overall long term downtrend line, not the top of the current medium term channel.
But what you can see is the breach of the recent uptrend line this week, the failure to break higher again yesterday, and then today's downdraft.
An even shorter time frame shows support in the SPI around 0.5590/95, today's low. A breach, and especially a close below this level, would open up further downside.
Of course the Australian market is driven by offshore events and the moves in offshore markets. But as I also wrote earlier this week "Australia is not the USA and will not get the full benefits of Trumponomics. Rather just the tailwinds of a strong US, Chinese and global economy. That makes the ASX the derivative, not the main game".
So when the big broking house start to downgrade the big banks which represent a quarter of the capitalisation of the S&P/ASX 200 it just adds further pressure on the local market.