The ASX 300 Banks index broke resistance at 8000 and is retracing to test the new support level. The index remains in a primary down-trend and only a higher low on the next correction, followed by a new high, would reverse that.
A weaker Australian Dollar has made the banks, with their high dividend yields, more attractive to offshore investors. But the sector remains squeezed by higher funding costs, falling credit growth and rising default risk.
With retracing banks and weaker prospects for miners, the ASX 200 hesitated. Expect another retracement to test 6150, but respect is likely and would confirm the primary advance. Target is the October 2007 high at 6750.
Technical signals suggest a primary advance while economic indicators warn of rising headwinds and a potential bear market. So I remain cautious, with close to 30% cash in the Australian Growth portfolio.
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.