ASX 200 Registers Rare Monthly Overbought Reading

This month, the ASX 200 has touched a “rare” Monthly (not weekly, but monthly) Overbought reading.

For the lack of a better word, I’m calling it rare as the chart below covers 35 years and this level has only been (generally) visited 5 times prior.

Such a moment is worth noting but it’s not an absolute ‘sell’ signal.

My work suggests a greater probability for higher prices or a ‘melt-up’ before we see a peak.

For now the upward trend remains intact and I’ll look for the index to touch 2.5 standard deviations (the upper end of the bands illustrated) above its mean before searching for exhaustion of the current bull market.

Keep in mind that prices can stay ‘overbought’ longer than expected and the constituents (and their weightings) have changed over the course of this charts history.

August 15, 2021

by Rob Zdravevski

rob@karriasset.com.au