Strong earnings reports and continued interest in major banks lifted the ASX 200. Rising Trend Index troughs signal buying pressure. Breakout above 6300 offers a short-term target of 6500.
The ASX 300 Banks index followed through above 8100, indicating another rally with a medium-term target of 8500 (long-term 8750).
But the ASX 300 Metals & Mining index broke support at 3750, warning of a test of primary support at 3400. Fears of a US-China trade war are likely to undermine commodity prices.
I am also wary of banks because of higher funding costs, falling credit growth and rising default risk .
So the primary trend on the ASX 200 is up but I remain cautious, holding over 30% cash in the Australian Growth portfolio.
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.