The end of 2018 was a terrible one for share markets. Rising US interest rates and trade tensions among other things saw the S&P/ASX 200 fall nearly 900 points from peak to trough. On Christmas Eve, the Australian share market hit an intraday low of 5410.2. Since then however, we have screamed higher, trading near 6100, or more than 11% above those December lows.
Often when share markets recover in a V-shaped manner, they then go back to retest their prior low. That is, after an initial bounce, there was a chance that our market would go back towards those December lows one final time. If that were to occur, does that mean we are heading under 5400, or would any dip in the share market be shallower in nature? To answer that, we simply need to look at how the market has traded since those December lows. If price action has been strong, then there is less chance of heading much lower.
Firstly, we need to look at the S&P/ASX 200 in the form of a daily candlestick chart.