The ASX 200 found support at 5950/6000, a bullish sign. Large bearish divergence on Twiggs Money Flow (13-week) continues to warn of selling pressure but breakout above 6150 would signal a fresh primary advance. Breach of 5950 is unlikely at present, but would warn of a test of primary support at 5650/5750.
The ASX 300 Banks decline continues, heading for a test of its 2016 low at 7200.
The ASX 300 Metals & Mining index breakout above 4000 is likely, offering a target of 4200.
The broad index looks bullish but I have two concerns. First is the weak banking index, representing the largest sector in the ASX 200. Second, iron ore prices are weakening. Spot prices are testing support at $62/tonne. A Trend Index peak below zero looks likely, and would warn of strong selling pressure. Breach of support at $58 would signal a primary down-trend.
GDP growth recovered to 3.1% for the year ending 31 March 2018, on the back of strong exports, but the overall report card for the economy remains weak.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He founded PVT Capital (AFSL number 546090), which provides income and growth strategies to wholesale clients.
Colin also co-founded Incredible Charts and writes the popular Patient Investor newsletter.
Using a top-down approach, Colin identifies macro trends in the global economy and then combines fundamental and technical analysis to evaluate opportunities in sectors that stand to benefit.
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.