A Sharp Rejection from the Peak

The S&P/ASX 200 (XJO) suffered a sharp technical breakdown this week, with a four-day sell-off wiping out recent gains and driving the index below a key psychological threshold. The Australian benchmark closed at 8,881.9, marking a significant 1.92% decline from its 9,055.6 close on Monday. This abrupt reversal comes just ten days after the index set a 52-week high of 9,115.2, signaling a rapid evaporation of investor confidence. The break below the 9,000-point level suggests the market’s bullish momentum has stalled, giving way to mounting concerns over both domestic inflation and a slowing global economy.

The Anatomy of a Four-Day Sell-Off

The week began on a stable footing, but the bullish sentiment quickly soured. After closing at 9,055.6 on Monday, the index fell for four consecutive sessions. The most significant damage occurred on Wednesday, when the XJO plunged 86 points, decisively breaching the 9,000-point support level to close at 8,926.2. This move appeared to trigger a fresh wave of selling, as investors who had bought the recent breakout were forced to liquidate their positions. The selling pressure was relentless, indicating methodical distribution rather than a single panic-driven event.

A Failed Rally and a Bearish Divergence

Friday’s trading session was particularly telling. The index opened higher at 8,913.2 and attempted a recovery, reaching an intraday high of 8,943.4. However, the rally was met with overwhelming selling pressure. The market reversed sharply, ultimately closing at 8,881.9—the absolute low of the day. This type of price action, a “failed rally” closing at the session low, is a strongly bearish signal, suggesting that sellers are in firm control. This weakness was even more pronounced given that U.S. markets, including the S&P 500 and DJIA, posted modest gains overnight. This divergence highlights that local and regional factors—namely, anxieties over the RBA’s next move and the health of China’s economy—are currently outweighing positive leads from Wall Street.

The 9,000-Point Resistance

As the market enters November, the technical picture has shifted. The 9,000-point level, which had been a psychological floor, will now likely act as a formidable resistance ceiling. All eyes will turn to the Reserve Bank of Australia’s (RBA) upcoming interest rate decision on Tuesday, November 4. With recent inflation data coming in hotter than expected, the market has rapidly unwound bets on a rate cut, a key driver of the index’s recent rally. Beyond domestic policy, the ASX 200’s resource-heavy composition makes it highly sensitive to forthcoming manufacturing (PMI) data from China, its largest trading partner.