ASX 200 Morning Market Outlook: Bearish Reversal Pattern For October

The ASX 200 recorded its sharpest weekly fall in 30 weeks, led lower by Health Care, Technology and Consumer Discretionary stocks. October’s shooting star and last week’s bearish engulfing candle strengthen the case for a reversal, though oversold signals suggest a short-lived rebound may occur before further weakness unfolds.

View related analysis:

ASX 200 Signals Market Top As October Reversal Pattern Forms

ASX 200 Market Snapshot

It was the most bearish week in 30 for the ASX 200 cash market, with Health Care (XHJ), Information Technology (XIJ) and Consumer Discretionary leading the way lower.
Only the Energy (XEJ) and Consumer Staples (XSJ) sectors advanced last week.
Bearish reversal candles formed on the ASX 200 monthly and weekly charts, with a shooting star in October and a bearish engulfing pattern last week.
Bearish clues from ASX internals suggest the broader index has topped out, and the bias remains to fade into rallies.
An inverted hammer on Friday suggests bearish momentum is waning over the near term, bringing the potential for a small countertrend bounce before anticipated losses resume.

Chart analysis by Matt Simpson - source: ASX, LSEG

ASX 200 Futures (SPI 200) Technical Analysis

The monthly chart shows a bearish RSI (14) divergence alongside a shooting star candle, warning of a potential reversal lower. The ASX 200 futures market fell for a fifth consecutive day, though bearish momentum is clearly waning with an inverted pinbar and spinning top doji forming on Thursday and Friday.

The ASX has closed only 13 points lower over the past two days while the RSI (2) remains deeply oversold at 4.7. With last week finding support around the September VPOC (8,852) and 8,862 low, bulls may be on guard for a minor rebound towards the 50-day SMA (8,394) or 8,590 low. Should prices break above these levels, bears could look to fade rallies towards 9,000 in anticipation of a move down to the September low (8,752) — a break beneath which would assume a deeper correction.

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.