Australia 200 - Outlook update and potential turning points.

CMC Markets

In the last 2 Weekly Outlook blogs, I've discussed the possibility that the index is in the first downward leg of a significant correction.

Today, the index has taken out the March low. This has thrown up some Fibonacci projections that might represent the ending point for this this first swing down.

These could represent a short term buying opportunity for who use Fibonacci strategies and are prepared to trade what should in theory be a bounce against a larger move to the downside. I've posted some details on the chart below for readers following this situation.

Australia 200 - 4 Hour Chart

Australia 200 CFD - Source: CMC Tracker

The swing down from the high in early March is looking as though it could be a 5 swing structure. The move under "3" now suggests we could be in the 5th and final thrust lower.

There is a cluster of Fibonacci projections between about 4875 and 4890. I don't view these clusters as a support or a prediction that the market will stop at that level. Rather, if price does happen to form a base at or close to this cluster, there is a reasonable chance this will be the ending point of the 5 swing decline. If that's right, we should see a decent rally to correct the whole move down from 5139.

The cluster shown on the chart consists of 3 projections to measure how far the move down from "4" to "5" might be. These are:

  • 100% of the swing down to 1
  • 127% of the length of the correction from "3" back to "4" and
  • 61.8% of the whole move down from the 5139 peak to 3.

If the market does stop at this cluster, I'll post some thoughts on trading strategy.

On the other hand, if we just sail through this level, I'll post an update on possible turning points at lower levels

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