ASX 200: Lasting Low or a Trap? (Be Ready for THIS) | Episode 286

By Jason McIntosh | 21 February 2025

ASX 200 and S&P 500 Weekly Technical Analysis

Extreme Moves, Rebounds, and What Could Be Next

Both the ASX 200 and the S&P 500 have seen significant action this week. Sharp declines over the past month are now followed by rebounds that are raising more questions than answers. Are we seeing the start of a sustainable recovery—or is this just a temporary reprieve before another sell-off?

Let’s take a look at both markets to better understand the technical structure and the potential scenarios ahead.

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📈 ASX 200 – A Shallow Rebound After Sharp Decline

For the first time in four weeks, the ASX 200 looks set to end in positive territory. But does this mark a lasting low, or is it just a temporary bounce?

What’s Happened:

• The ASX 200 fell sharply—down 10.5% from its mid-month all-time high.
• Last week’s low triggered a rebound of 3.5% so far.
• While any bounce is welcome, the size of this rebound is underwhelming compared to past sharp declines.

Key Concerns:

• The index is still below its declining 50 and 100-day moving averages.
• Rebounds after sharp falls often result in retests of recent lows, as weak rallies run out of steam.
• There’s a risk of a structural shift, where rallies get sold into, rather than dips being bought—something we haven’t seen consistently since last year.

Technical Insight:

• An important indicator we’re watching is the percentage distance from the 50-day moving average.
• Last week, the All Ordinaries index was 6% below its 50-day moving average, historically a level where rebounds often begin.
• We’re seeing a rally from that level, but it’s lacking momentum.
• In similar historical setups (e.g., 2018, 2011), markets often retested lows before stronger rebounds developed.

What Could Happen Next:

1. A retest of last week’s low, shaking out remaining weak holders.
2. If support holds, a larger rally back towards the moving averages is likely.
3. If not, we could see continued volatility and more cautious conditions in the months ahead.

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📈 S&P 500 – Echoing the ASX 200’s Pattern

Like the ASX 200, the S&P 500 has seen a 10.5% correction from its highs. The rebound so far? Muted.

What’s Happened:

• After the sharp drop, the S&P 500 is only up 2.8% from its low.
• This isn’t a sign of enthusiastic buying—investor hesitation remains.

What’s Holding It Back:

• The Magnificent Seven mega-cap tech stocks continue to struggle.
• An ETF tracking them (MAGS) has paused its downward momentum, but no clear rebound yet.

Technical Picture:

• The S&P 500’s 50 and 100-day moving averages are close to crossing, creating a potentially bearish setup.
• Extreme bearish sentiment: The American Association of Individual Investors (AAII) survey shows pessimism at its 7th highest level ever.
• These are conditions where notable lows often form, but more selling can’t be ruled out.

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Historical Context – What Past Corrections Tell Us

A recent study examined the fastest corrections (from all-time highs to 10% declines) in the S&P 500 since 1950.

Key Findings:

• The recent decline ranks as the 6th fastest on record—16 days to reach a 10% drop.
• After previous fast corrections:
  ✅ 4 out of 6 were above their lows one month later.
  ✅ All 6 were above their lows three months later.
  ✅ 6-month and 12-month returns were often positive, though with exceptions like the dot-com bust.

The Takeaway:

• Fast corrections typically lead to strong rebounds, but can involve months of choppy, difficult conditions before sustainable trends return.

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What I’m Doing

1. Holding extra cash, prepared for more volatility.
2. Using wide trailing stops to stay in remaining positions but protect capital.
3. Not rushing to buy. There are a few interesting opportunities in resource stocks, but overall, this is a time for defense, not offense.

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What to Watch Next Week

• ASX 200: Does the index hold above recent lows? Can it climb back above moving averages?
• S&P 500: Will the Magnificent Seven show signs of life? Does bearish sentiment fuel a rebound?
• Market Structure: Is this a transition from buying the dips to selling the rallies?

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Closing Thoughts

• The next meaningful rally will tell us a lot about where we’re headed.
• Be cautiously calm. Follow a disciplined process and manage risk.
• Don’t be tempted to pick the bottom—stick to your trading plan.

👉 For a deeper dive into technical analysis, check out our Weekly Strategy Sessions.

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Motion Trader‘s algorithms scan more than 2,000 ASX stocks daily in search of medium term investment trends. We then tell our members precisely when to buy shares. And most importantly, we tell them when to sell.

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Video Timestamps

00:00 Intro

00:45 ASX 200: Lasting low or temporary bounce? (Be ready for THIS)

04:40 Most people aren’t watching this indicator — but they should

07:15 Could these historic scenarios play out again?

10:45 Be prepared for THIS possibility (being aware is key)

13:10 SP500 rallies (but is it the real deal?)

14:40 This is what’s holding back the SP500

16:30 Look at these surprising stats (could it happen again now?)

19:00 Don’t miss this crucial takeaway

Jason McIntosh | Founder, Motion Trader

Jason’s professional trading career began over 3 decades ago. He’s a founder of two stock advisory firms, a listed funds management business, and has helped thousands of investors navigate the stock market. Click here to read Jason’s incredible story of, at age 20, sitting alongside some of the world’s greatest traders (and the life changing experience that came with that).