ASX 200 News Today: Gold and Tech Lead Recovery as Index Stays Trapped in Key Range

It was a volatile but ultimately positive session for the S&P/ASX 200 Index on Tuesday. The market was forced to open with poor sentiment due to the weak sentiment from international markets. However, buyers intervened before midday and raised prices further towards the close. The index has recorded small increase on Tuesday and closed at 8,481.8 points. This bounce was in contrast to mixed market signals on Wall Street.

Sector Rotation Drives Late ASX 200 Recovery

There was evident sector rotation in the market. Most sectors finished on a positive note even though some of them showed poor performance on Monday. Investors abandoned the defensive sectors and shifted to growth and commodity-based sectors. This move contributed to stabilising the index and enabled the late-session rally. The chart below shows that the ASX 200 information technology index rebounded after a three day decline and closed positive at 1,556.8.

On the other hand, the gains were led by gold stocks. The All Ordinaries Gold Index shot up strongly with investors seeking security in the face of geopolitical risks. The real estate and communication services also fared well as the risk appetite improved across the market.

Energy and Defensive Stocks Lag Despite Market Rebound

The rally was not participated in by all the sectors. The stocks of energy were under pressure despite increased geopolitical tensions. The S&P/ASX 200 Energy Index fell because investors cashed their gains following recent gains. This is an indication of the short term positioning rather than a change in the overall trend.

Industries of defense performed poorly as well. Both consumer staples and utilities were down in the session. Despite the decline in the utilities sector, the overall trend for utilities remains bullish as seen in the chart below.

This shows that investors decreased defensive positioning and rotated into more growth areas. Only slight improvements were made in the areas of Financials, healthcare and industrials which indicated optimism but not strong belief.

ASX 200 Technical Outlook: Key Levels to Watch

The 4-hour chart for ASX 200 shows strong consolidation between 8,800 and 8,400. A break of either of these levels will define the next move in the index. A break below 8,400 will open the door for a strong drop to 7,800. Despite this consolidation, the RSI is hovering below the mid level, which indicates an overall negative trend in the index.

This consolidation is also observed on the hourly chart, which shows that the index hit the 100 SMA and shows a drop in the last few hours of the session. The immediate resistance on Wednesday will be 8,550, whereby a break above this level will open the door for a rally to the 200 SMA at 8,750. However, a break below 8,300 will put the index under strong bearish pressure. This bearish pressure may take the index to 7,800.

Bottom Line

The ASX 200 recovered from weak start and finished higher as buyers stepped in at lower levels. The rotation of the sector helped the recovery and strength in real estate, technology and gold counterbalanced weakness in energy and defensive stocks. However, the market shows cautious trend as profits in major areas are low and the mood still changes according to the global events.

The index is currently in a period of consolidation between 8,400 and 8,800 and the next step will require a clear break of these levels. A break above 8,800 can trigger temporary hope and prolong the recovery. However, a break below 8,400 may result in more selling pressure. Geopolitical risks and uncertainty in global market remain under the spotlight. Therefore, volatility is expected to be high in the near future.