The ASX 300 Banks Index respected primary support at 7000 but only recovery above 7450 would indicate another bear rally. Declining peaks on the Trend Index continue to warn of selling pressure. Breach of 7000 would signal a primary decline with a long-term target of 5000.
ASX 300 Metals & Mining Index is again testing support at 3500. Breach would be a bearish sign for the broad ASX 200 index. Primary down-trends on the two biggest sectors would be likely to drag the overall index into a similar down-trend.
On the ASX 200, a long tail and bullish divergence on Twiggs Money Flow indicate strong support. Recovery above 5950 would suggest another advance but that is unlikely in the current climate. Breach of primary support at 5650 would signal a primary down-trend with a target of 5000.
I have been cautious on Australian stocks, especially banks, for a while, and hold 40% 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.