ASX 200 Morning Market Outlook: Bearish Reversal Pattern For October

The ASX 200 recorded its sharpest weekly fall in 30 weeks, led lower by Health Care, Technology and Consumer Discretionary stocks. October’s shooting star and last week’s bearish engulfing candle strengthen the case for a reversal, though oversold signals suggest a short-lived rebound may occur before further weakness unfolds.

View related analysis:

ASX 200 Signals Market Top As October Reversal Pattern Forms

ASX 200 Market Snapshot

It was the most bearish week in 30 for the ASX 200 cash market, with Health Care (XHJ), Information Technology (XIJ) and Consumer Discretionary leading the way lower.
Only the Energy (XEJ) and Consumer Staples (XSJ) sectors advanced last week.
Bearish reversal candles formed on the ASX 200 monthly and weekly charts, with a shooting star in October and a bearish engulfing pattern last week.
Bearish clues from ASX internals suggest the broader index has topped out, and the bias remains to fade into rallies.
An inverted hammer on Friday suggests bearish momentum is waning over the near term, bringing the potential for a small countertrend bounce before anticipated losses resume.

Chart analysis by Matt Simpson - source: ASX, LSEG

ASX 200 Futures (SPI 200) Technical Analysis

The monthly chart shows a bearish RSI (14) divergence alongside a shooting star candle, warning of a potential reversal lower. The ASX 200 futures market fell for a fifth consecutive day, though bearish momentum is clearly waning with an inverted pinbar and spinning top doji forming on Thursday and Friday.

The ASX has closed only 13 points lower over the past two days while the RSI (2) remains deeply oversold at 4.7. With last week finding support around the September VPOC (8,852) and 8,862 low, bulls may be on guard for a minor rebound towards the 50-day SMA (8,394) or 8,590 low. Should prices break above these levels, bears could look to fade rallies towards 9,000 in anticipation of a move down to the September low (8,752) — a break beneath which would assume a deeper correction.

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

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-- Written by Matt Simpson

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