The ASX 200 broke short-term resistance at 5050 on the hourly chart before retreating to test its new support level. The index is advancing in layers of 25 points (5000 >> 5025 >> 5050 >> 5075) and shows no signs of abating. But retracement to test the new support level of 5000 remains likely in the larger time frames. Respect of support on the weekly chart would confirm a primary advance, with a long-term target of 6000*.
* Target calculation: 5000 + ( 5000 – 4000 ) = 6000
One area of concern: the advance is being driven by a scramble for yield, with blue chip stocks in the ASX 50 [$XFL] out-performing mid-caps [$XMD] by a wide margin — the exact opposite of what one would expect in a bull market.
The situation is even worse when comparing to small-caps [$XSO].
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.
He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.