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Chart of the Day: AUS200

Wednesday’s big news about the inversion of the US Treasury two-year versus ten-year yield curve triggered the wave of selling across the global equity market. Investors are anxious about Federal Reserve policy and global growth — and rightly so — as the inverted yield curve has predicted past seven recessions through history.

Chart of the Day - Aug 16, 2019 - AUS200, daily

There’s no surprise, then, to see the S&P500 closing well over 2% lower (Wednesday), with the AUS200 following in its wake.

Yesterday’s Australian employment data was certainly positive, with 41,000 jobs increased versus 14,000 expected. A total of 34,500 full-time jobs were created, yet the market saw little inspiration, concentrating solely on the message the bond market is portraying, while still being sceptical anything will be solved in the US–China trade war.

Right now, AUS200 is having a major correction from its all-time highs, as the bearish A, B, C pattern indicating further weakness, with significant support seen at around 6,378 mark. Any potential upside from here can be seen as selling into strength, with the 38.2% Fibonacci level of the current downward range from all-time highs (30 July) and 100-day EMA adding conviction to the downside.

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