Is the ASX heading toward all-time highs?

The outlook for the Australian equities market is one of the best globally and is set up to cope with a potential recession. The Australian market showed itself to be robust in much of the volatility and downturn of last year being one of the more solid economies.

This relative strength has carried so far into 2023 and has largely been due to the resource heavy nature of the ASX with most companies on the index being large resource and mining. The XJO was also geographically protected from much of the geopolitical conflict in Europe that many European markets had to suffer through.

The XJO is currently just 300 points off its all time high and with improving commodity prices it is well placed to weather a recessionary storm. A reopening of China may further support growth of the Australian market because growth in China may help various sectors such as travel, construction, manufacturing, and resources.

Lastly, as the Central banks across the world look at lowering interest rates it will only help growth economies such as Australia. Risk assets such as the Technology sector and growth economies should benefit as the cost of borrowing comes down. Although Banks will have to balance the need to lower rates with the need to tame inflation and the fight between which is a worse evil to fight will be much of the talking point of 2023.

Technical Analysis

As stated above the XJO is currently just about 300 points below its all-time highs and is trending towards that target.

Firstly, on the weekly chart the XJO has been able to maintain a tight range over the last 2 years. Once the dust had settled after the Covid 19 pandemic the price developed a range between 6412 and 7634. The price also bounced of 6412 its long-term support twice in 2022 before pushing higher. Importantly, since October 2022, the XJO has been able to stay above the 50-week moving average as it has gained momentum.

On the daily chart the price has broken to level not seen since April 2022. Therefore, it is likely that the price may face some significant resistance as it approached 7600. Another positive sign is that the short term 50 day moving average has crossed back over the longer term 200 day moving average. This indicates that momentum is beginning to shift towards the bulls.

With more information still to come out, the Australian equities market is as well placed as any to deal with any potential macroeconomic factors that come its way.