ASX200 Why the plan hasnt changed

The majority of October's gains erased as the market was confronted by a surge in the number of new coronavirus cases in Europe and the U.S. The possibility of a contested U.S. election, and the slow realisation that a pre-election U.S. fiscal stimulus deal would not be forthcoming.

Prompting the ASX200 to again respect and reject 6200ish, the top of a five month range and the reason we suggested taking profits on ASX200 longs in previous articles.

“Given the unpredictable nature of 2020 and the limited upside follow-through after trading above 6200, I have followed my suggestion from last week to increase the cash holding in my super portfolio.”

Despite the intersection of the three events above, we intend to follow the previously stated plan and to use the current dip to rebuild core longs. As the window before the U.S. election is closing I commenced doing this today and will add towards range lows, 5800/5700 area.

The reason for this is the big picture for the stock market has not changed. COVID19 is something that markets and people will learn to live with. The viruses latest surge and subsequent lockdowns make additional stimulus in both Europe and the U.S more certain.

On a domestic level, Victoria has continued its virus free streak today and is well placed to play its part in a re-opening of Australia’s internal borders before Christmas and the next stage of the Australian economies return to COVID19 “normal”.

Furthermore, economic data released today showed that building approvals unexpectedly surged in September. And that Australian Capital City property prices moved higher for the first time since April. Both numbers, supported by an easing in lending standards and low-interest rates.

In summary, the bias remains for the ASX200 to respect well-established ranges. We like using the current dip to add to core longs looking for a retest and ultimately a break above 6200 into year-end. We would only reconsider this view on a sustained break/close below 5700/5650.

Source Tradingview. The figures stated areas of the 2^nd of November 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.