ASX hits record high in thin trade, but double top clouds the outlook

Thursday provided the usual dose of thin trading ranges and low liquidity around Thanksgiving, making technical less reliable. And we could be in for another quiet day heading into the weekend, which means traders have a choice of referring to much lower timeframes in hope of catching smaller moves, being patient with higher timeframes, or simply taking the day off. We also have month-end flows to factor in which can often prompt spurious price action and the occasional unexplained price spike.

Therefore, today’s article will be short and simple and effectively a revision of yesterday’s. My bias towards ASX 200 futures remains bearish but, as always, timing is key.

Events in focus (AEDT):

• 10:30 – JP jobs/applications, Tokyo CPI
• 10:50 – JP industrial production, retail sales
• 11:30 – AU housing credit
• 16:00 – JP construction orders
• 20:30 – UK money supply, mortgage lending
• 21:00 – EU CPI
• 22:00 – UK BOE governor Bailey speaks
• 00:30 – CA GDP

ASX 200 futures (SPI 200) technical analysis:

I noted that the ASX 200 futures market had so far struggled to break above 8500, and given the weak lead from Wall Street I had a hunch that the ASX could fall on Thursday. But it clearly had other plans, instead opting to retest the 8500 level before closing at a fresh record high.

However, once again the market has struggled to conquer 8500, and the record high was achieved during thin trade. Daily volume was also the lowest in five days, and the record high was really set with a market’s tendency to drift higher as opposed to any sort of aggressive bullish initiation. Ultimately, I remain sceptical of a runaway breakout and on guard for a move lower.

A double top has formed around 8500 and prices broke lower from its supposedly bullish channel. All three Wall Street indices futures markets printed unconvincing up-days within their prior day’s bearish ranges, the S&P 500 remains trapped beneath its own record high.

The bias remains to fade into rallies on the ASX, in anticipation of a move down to 8400. A break beneath the 8378 low brings the 8348 VPOC and 8307 lows into focus.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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