The benchmark ASX2000 popped through 6000 points this morning shortly after 11am AEDT.
Then promptly fell again.
There are many strategists and investors who will argue 6000 points is “just a number” for the ASX200 which is, after all, just a weighted reflection of the top 200 stocks on the Australian index. And it is a strong argument: for people who take a fundamental view on stocks — that the market should price equity values relatively efficiently on all the available information and “checkpoints” like 6000 shouldn’t really be an issue.
Basically there are enough investors wary about stock valuations to trigger pullbacks when the ASX hits this level. There is also an important technical factor at play, in that the ASX has had a run at 6000 three times in the past 10 years — 10 years! — and failed to properly push through the overhead resistance. Look:
“Mental accounting” is very much in vogue these days thanks to behavioural economist Richard Thaler winning the Nobel Prize. By the time I’ve finished writing this post the ASX may well have broken through the level again, but the stumbles at this point are an insight into how the market — be it robot traders, mums and dads, or institutions — thinks about the index.
6000 is a level at which enough share owners have decided they’ve made what they need, and get out.
All of this of course means that if the index does manage to break through 6000 and keeps going, we’re in a meaningful new phase for the benchmark Australian index.