ASX 200 Outlook: SPI Futures Rise, But Resistance Looms Over Rally

The ASX 200 suffered another sharp selloff on Thursday, with a bearish engulfing candle forming around its 200-day EMA and monthly pivot point. While SPI 200 futures recovered overnight alongside Wall Street, resistance levels between 8675 and 8750 could prove difficult to overcome if the latest optimism surrounding US-Iran peace talks fades.

 

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ASX 200 Rally Faces Key Resistance After Bearish Engulfing Signal

ASX 200 Market Snapshot

• The ASX 200 suffered a selloff exceeding 1% for the third time in less than two weeks, forming a notable bearish engulfing day
• 9 of the 11 ASX 200 sectors declined, led by Materials (XMJ), Financials (XFJ) and Tech (XTJ), while Consumer Staples (CSJ) and Consumer Discretionary (XDJ) declined
• While the volatility of Thursday could appeal to bears, note that Friday has the lowest daily average range of the week at 85 points over the past year, or 84 points over the past three months

Source: ASX, LSEG

 

ASX 200 Sector Leaders Flash Bearish Reversal Signals

• Financials (XFJ) and Materials (XMJ) — the two largest sectors, accounting for more than half of the ASX 200's market capitalisation — have been the primary drivers of index direction over the past three trading days.
• Correlations have also remained strong with Industrials (XIJ) and Technology (XTJ), although their respective index weightings are much smaller.
• All four sectors traded lower on Thursday. Three formed bearish engulfing candles (where the open and close sit outside the prior day's open and close), while XIJ formed a dark cloud cover, a two-bar bearish reversal pattern.
• XMJ is hinting at a swing high and potential lower high near 25,000. Industrials are threatening a break below 8,000, while attention turns to XFJ to see whether it can hold above 9,000 today.
• That said, it is the last trading day of the month so traders may need to brace themselves for fickle moves as portfolio managers balance their books

 

Source: ASX, LSEG, TradingView

 

 

 

 

ASX 200 Technical Analysis

Thursday's bearish engulfing candle formed around the 200-day EMA and monthly pivot point, while a bearish divergence in RSI (2) suggests momentum may be rolling over. Unless headlines surrounding US-Iran peace talks gain further traction, the candle has the hallmarks of a swing high.

SPI 200 futures rose 0.6% overnight, although open interest remained subdued, suggesting the move largely tracked Wall Street rather than reflecting strong domestic conviction. Resistance was found around 8700 overnight, while the monthly pivot point sits closer to 8750 on SPI futures. That leaves me looking to fade rallies into the 8700-8750 zone, particularly if the market struggles to accept above the 8675 gamma ceiling.

 

ASX 200 GEX Levels and Options Positioning

Options positioning highlights 8675 as the dominant call wall, while 8650 remains a nearby magnet and 8600 a key downside floor. Should the overnight optimism fade, bears may seek opportunities to re-engage shorts around 8675, 8700 or even 8750, with the downside focus returning towards yesterday's cash-market range.

Source: ASX, ASX24, TradingView

 

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

 

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