**ASX 200 Outlook: Bearish Correction Expected After 9000 Rejection**
*Based on original reporting by Matt Simpson via FOREX.com*
The Australian share market, as represented by the ASX 200 index, has recently demonstrated signs of exhaustion near record highs. Investor focus has now shifted to whether the bullish rally can be sustained or if the index is entering a phase of correction. The strong rally seen earlier in the year, largely driven by optimism around the Reserve Bank of Australia’s (RBA) monetary policy and global economic resilience, is now encountering headwinds.
This detailed analysis will examine the recent performance of the ASX 200, key technical indicators pointing towards a potential downside, and macroeconomic factors influencing sentiment. With futures signaling a likely pullback, traders and investors alike are beginning to temper their expectations for new highs in the near term.
### Current Market Overview: A Rejection Near the 9000 Level
– The ASX 200 recently approached the 7800 level, testing historical highs and showing remarkable strength since the turn of 2024.
– While it didn’t quite reach the symbolic 9000 mark, a clear rejection at higher resistance levels has triggered concerns of a short-term bearish correction.
– The weekly candle chart reveals signs of exhaustion, with long upper wicks and a failure to post strong closes above previous resistance.
– Futures markets point to an opening gap lower, suggesting bearish momentum could persist.
### Technical Analysis: Signs of a Correction
Technical patterns and indicators are contributing to the growing suspicion that the recent rally may have topped, at least in the short term.
**Price Action Analysis:**
– The ASX 200 posted a strong multi-week rally, but momentum has started to fade.
– Price briefly breached the 7800 zone but established a clear rejection based on recent candlestick formations.
– A shooting star pattern on the daily chart reinforces the prediction of near-term weakness.
**Support and Resistance Levels:**
– Key resistance was met around 7800–7850.
– The next major resistance level would have been around 8000, but sentiment isn’t currently strong enough to push this high.
– Immediate support lies near 7650, with stronger support levels around 7550 and 7400.
– A break under 7550 could signal a more significant trend reversal.
**Moving Averages:**
– The ASX 200 is still trading above its 50-day and 200-day exponential moving averages (EMAs), maintaining a long-term bullish structure.
– However, the narrowing distance between price and the 50-day EMA suggests short-term pressure could lead to a test of these levels.
**Relative Strength Index (RSI):**
– RSI readings on the daily chart approached overbought territory last week, peaking just above 70.
– A downward turn in the RSI without making new highs in price is a potential bearish divergence and may herald a medium-term correction.
**MACD (Moving Average Convergence Divergence):**
– The MACD histogram has begun to flatten, signaling weakening upward momentum.
– A bearish crossover is nearly in progress and may confirm a shift in trend should follow-through selling activity take place.
### Market Sentiment and Broader Context
Shifts in global market sentiment, rising concerns around inflation persistence, and changing rate expectations from the RBA are influencing the ASX 200’s outlook.
**Domestic Economic Factors:**
– Inflation in Australia remains sticky, with core readings still above the RBA’s target range.
– This has led to a more hawkish tone from the central bank than anticipated at the start of the year.
– Optimism around rate cuts has faded, leading to a reassessment of equities valuations.
**Reserve Bank of Australia Monetary Policy:**
– The RBA has left policy rates unchanged in recent meetings, but its forward guidance has tilted slightly more hawkish.
– Markets are reducing expectations for cuts in the second half of 2024.
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