The ASX 200 displays a cautious rally, with short candles reflecting an absence of buyer enthusiasm. But bullish divergence on 21-day Twiggs Money Flow indicates longer-term confidence.
The monthly chart shows similar rising troughs on 13-week Twiggs Money Flow, reflecting buyer confidence. Recovery above 6000 would be bullish, suggesting another advance. Respect of resistance is less likely, but would warn of another test of primary support at 5650.
The ASX 300 Banks Index respected primary support at 7000, while bullish divergence on 13-week Trend Index indicates buying pressure. Expect a bear rally to test resistance at 8000. The primary trend, however, is down.
The ASX 300 Metals & Mining Index is consolidating above 3400 but rising iron ore prices are likely to lift the index. Recovery above 3800 would signal another advance.
The All Ordinaries Gold Index again respected resistance at 5500 and another test of primary support at 4500 is likely. Breach would warn of a primary down-trend with a target of 3500.
I remain cautious on Australian banks and hold 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.