The ASX 200 broke resistance at 5200, but bearish divergence on 13-week Twiggs Money Flow continues to warn of selling pressure.
The daily chart also shows a bearish divergence, suggesting a test of support at 5100/5120. Failure would indicate a correction, while respect would confirm an advance to 5400*.
* Target calculation: 5150 + ( 5150 – 4900 ) = 5400
Bipolar behavior of the market is highlighted by comparison of the ASX 50 Large Caps to the ASX Small Ords (ASX 300 – ASX 100). Small Caps tend to outperform Large Caps during a bull market, as can be seen from 2003 to 2007. But the current “bull market” gives out mixed signals, with Large Caps powering ahead while Small Caps remain in a down-trend. Demand for Large Caps seems to have been inflated by international capital flows.
And the falling Aussie Dollar, with a target of $0.96* against the greenback, is likely to lead to retreat of the ASX 50 and ASX 200 indices.
* Target calculation: 1.01 – ( 1.06 – 1.01 ) = 0.96