A long-term view of ASX 200 Financials shows the index testing key support at 5300, confirming the selling pressure signaled by bearish divergence on Twiggs Money Flow. Breach of support is likely, especially with the final report of the Royal Commission on Banking due for release on Monday. Breach would offer a target of 4000.
The Materials index continues in a primary up-trend, assisted by a surge in iron ore prices caused by the temporary shut-down of iron ore mining in Brazil as tailings dams are inspected after the recent disaster.
Financials is the largest sector in the ASX 200. Respect of 6000 is likely and reversal below 5650 would signal a primary decline, with a target of the 2016 low at 4700.
I have been cautious on Australian stocks, especially banks, for a while, and hold more than 40% in cash and fixed interest investments 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.