Is the ASX 200 Entering a Critical Phase? Key Insights for Investors | Episode 276
By Jason McIntosh | 3 January 2025
The ASX 200 is at a pivotal point, with market activity offering both encouraging signs and potential risks. Recent price action raises questions about whether this is the start of a basing process for future gains or a warning of deeper vulnerabilities ahead.
Let’s break it down.
The Big Picture: Positives in Recent Price Action
The ASX 200 has shown resilience following its December 20 low, rebounding strongly and holding onto those gains over the last week. This shallow pullback after a strong rally is a positive sign, and the price action currently sits within a Fibonacci retracement zone—a common area for a market to consolidate and stabilize before pushing higher.
Moreover, we’ve seen consistent interest in “buying the dip,” a hallmark of upward market phases. This pattern has been a dominant feature throughout the past year, where pullbacks to moving averages have attracted buyers. The key question now is: Can the ASX 200 build a solid base at these levels and set the stage for another upward leg?
What Could Be Coming Next?
One potential scenario is a repeat of what happened in April 2024. Back then, the ASX 200 pulled back from an all-time high, briefly dipped below its moving averages, and consolidated for several weeks. This basing phase ultimately provided a platform for further gains within an ongoing range. While the current price action won’t mirror last year’s exactly, it’s a good example of how markets can stabilize and set the stage for future rallies.
However, the risk is that prices stall at current levels or slightly higher, fail to establish a base, and instead roll over. A break below 8,100—and then beneath the December low—would be a bearish development that investors need to monitor closely.
The Equal-Weighted ASX 200: A Warning Sign?
The equal-weighted ASX 200, which removes the dominance of large-cap stocks, is presenting a more concerning picture. Prices have struggled to move back above the 50-day and 100-day moving averages and remain below key support at 1,930.
For this index to regain a bullish tone, a strong rally back towards 2,000 is needed. Such a move would break the current selling cycle and signal renewed strength. However, if prices continue to languish below the moving averages and the Fibonacci retracement zone, the market could open a “window of vulnerability,” increasing the risk of a breakdown to lower levels.
What Should Investors Do?
- Give the Uptrend the Benefit of the Doubt: The ASX 200 has been in a strong upward phase over the past 12 months. While risks are present, the structure hasn’t flipped bearish yet, so the prevailing trend still deserves the benefit of the doubt.
- Monitor Key Levels: Watch for a move above 2,000 in the equal-weighted index and continued consolidation above 8,100 in the ASX 200. These will be critical for confirming market strength.
- Stay Disciplined with Trailing Stops: Trailing stops allow you to stay with trends for as long as possible while having a predefined exit strategy if the market turns.
- Hold Some Extra Cash: With the market at a critical juncture, holding extra cash provides flexibility to act on opportunities or manage risks as the situation evolves.
Conclusion: Watch, Don’t Guess
The ASX 200 remains in a bullish structure for now, but investors need to stay vigilant. A failure to break higher or prolonged weakness in the equal-weighted index could signal deeper risks. This is a time to watch closely, stick to your strategy, and ensure you have a clear exit plan in place.
💡 Key Takeaway: The ASX 200 is at a crossroads. While the uptrend remains intact, closely monitoring key levels and maintaining discipline will be essential as the market navigates this critical phase.
👉 For a deeper dive into technical analysis, check out our Weekly Strategy Sessions.
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Video Timestamps
00:00 Intro
00:50 Is the ASX 200 rebound the start of a new rally?
02:25 Here’s an insight to what could be coming next
03:20 This is the number 1 risk I’m watching for
04:05 The next two weeks are critical (here’s why)
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).
Meet Jason
I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.