ASX 200 Technical Analysis: Consolidation and Market Dynamics | Episode 268

By Jason McIntosh | 29 November 2024

The Australian Securities Exchange (ASX) 200 has recently reached a new all-time high, maintaining its bullish trend from the start of the year. However, investors and traders are now questioning whether this upward momentum will accelerate or if we’re due for a consolidation phase. Let’s dive into a comprehensive technical analysis of the ASX 200 and explore potential scenarios for the near future.

Understanding the Current Market Structure

The ASX 200’s underlying structure remains bullish, with key technical indicators supporting this view:

1. Rising 50-day and 100-day moving averages
2. Price action above these moving averages
3. Steady, orderly advance without excessive optimism

Technical Analysis Tip: Moving Averages
Moving averages are crucial indicators in technical analysis, helping traders identify trends and potential support/resistance levels. Learn more about moving averages in technical analysis.

Signs of Potential Consolidation

Despite the overall bullish trend, several factors suggest a possible pause or consolidation phase:

1. Materials Index Weakness: The materials sector, a significant component of the ASX 200, shows signs of vulnerability with a muted bounce and sideways consolidation below key moving averages.
2. ASX 200 Equal Weight Non-Confirmation: The equal-weight version of the ASX 200 has not broken above its October high, unlike the market-cap weighted index. This non-confirmation could indicate a lack of broad market participation.

Technical Term: Non-Confirmation
Non-confirmation occurs when related markets or indicators fail to confirm a new high or low in the primary index. It can sometimes signal potential weakness or a change in trend.

Strategy for the Current Market Environment

Given the mixed signals, here’s a balanced approach for investors and traders:

1. Maintain market exposure due to the overall bullish structure
2. Be prepared for potential consolidation or sideways movement
3. Use wide trailing stops to manage risk and maximize profits

ASX 200 risk management strategies
Implementing effective risk management techniques is crucial for successful trading. Explore more ASX 200 risk management strategies.

Conclusion: Cautious Optimism

While the ASX 200 maintains its bullish trend, investors should be prepared for a potential consolidation phase. By maintaining market exposure with appropriate risk management strategies, traders can position themselves to benefit from continued upside while protecting against potential downturns.

For more insights into technical analysis and market trends, explore advanced strategies here. 

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Video Timestamps

00:00 Intro

00:30 ASX 200’s bullish trend intact (but is a change coming?)

03:20 This key index gives a clue to what’s coming next

05:10 Is this non-confirmation a concern? (It’s often a bearish signal)

08:10 This is my all-weather strategy, no matter what happens

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).