Australian Index to Remain Consolidated?

• Monday falls, but sees buyers return late in the day. 

• Commodities seem to be helping out during the Monday session. 

• 50-Day EMA seen as a barrier for 2 crucial commodities. 

Over the last several sessions, we have seen quite a bit of volatility in the ASX 200, just as we have seen around the world. After all, the market is very sensitive to global concerns at the moment, as Australia is both a major way to play commodities, just as it is a way to play Asian growth or weakness. 

With massive amounts of geopolitical concerns around the world, it does make a certain amount of sense that Australia takes a bit of a backseat as far as risk-taking is concerned. That being said, when you look at the technical analysis of the index, you can clearly see that the AU$7900 level is a massive resistance barrier that has been tested multiple times. It certainly seems as if every time the market pulls back, there are plenty of traders willing to step in and pick up the index, putting a bit of pressure on the market to eventually break out. 

Technical Analysis 

As stated previously, it does look as if the market is gradually squeezing higher. The 50-Day EMA is sitting just below current pricing, near the AU$7050 level. It is rising at a slight angle, suggesting that although we are bullish, it is a situation where you need to be a bit patient. Pullbacks at this point in time continue to attract plenty of buyers, so it does make sense that we would see traders looking at this through the prism of a longer term uptrend. If we were to break out above the AU$7900 level, then we might have the “Beachball being held under water effect” come into the picture. This is when price rises quite rapidly after breaking through the resistance barrier, much like when you hold a beach ball under water, and it finally breaks the surface, it tends to bounce rather high. However, it is worth noting that the market simply seems a bit sluggish at this moment, and the fact that the market has struggled so much to break above the AU$7900 level, suggest that we may have some work to do. 

Commodities 

Commodity markets will of course have a major influence as well, and the copper market is the first place that a lot of people look toward. It is currently testing the 50-Day EMA and did have a strong Monday. If the market were to break above the massive negative candlestick from last Friday, meaning recapturing the $4.70 level, it could send traders looking into stocks such as BHP, Rio Tinto, etc. 

Gold also has its influence on the Australian stock market, and by extension the Australian dollar. It is currently also testing the 50-Day EMA after the bounce on Monday, which of course is a good sign. Ultimately, if both of these commodities rise, it’s almost a given that there will be a bit of a “knock on effect” in the materials section of the ASX 200, which of course is always a big driver of what foreigners do when it comes to buying into the relatively sensitive ASX. 

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