ASX 200 Rebounds, But Resistance Looms

The ASX 200 has bounced from the July low after falling nearly 7% from its record high, supported by a bullish RSI divergence and firmer Wall Street sentiment. But with resistance clustered around 8800 and 8875, the rebound may soon face a more meaningful test.

 

ASX 200 Rebound Faces Resistance Around 8800

The ASX has fallen nearly 7% since reaching its record high just over five weeks ago. Correlations between sectors and the broader index strengthened sharply as macro themes took hold, but the ASX has since found support around the July low, accompanied by a bullish RSI divergence.

With Wall Street also regaining bullish momentum, the rebound could have further to run over the near term. The daily chart points to 8800 as the main upside pivot, with 8875 the broader resistance level if the recovery extends. Above current prices, the 200-day averages just above 8800 could also provide an important technical test.

Source: ASX, TradingView

• 8775 is the first resistance level, followed by the more important 8800 battleground. 
• A clean break above 8800 would bring 8875 into focus. 
• On the downside, 8700 is the key support level, with 8675 providing the next line of defence if selling resumes.
• On the daily timeframe, 8600 is the more relevant deeper support should volatility expand materially.

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Source: Forex.com, TradingView

ASX 200 Sector Correlations Ease as Selloff Loses Momentum

The fact that correlations between the ASX and its sectors are no longer at extremes could be a sign that the worst of this phase of the selloff is behind us. This could mean lower volatility and choppier price action than we saw during the recent decline.

That is useful information when managing expectations and choosing strategies. And with the weekend approaching, intraday setups may be preferable, alongside tighter risk management and more conservative targets. We can then reassess conditions next week.

Source: LSEG