The Aussie Dollar broke long-term support at 70 US cents (as shown on the quarterly chart below), closing below 69 cents. Target for the decline is 60 cents.
The ASX 200, reflecting the counter-balance between its two largest sectors, recovered to test resistance at 6350. The Trend Index trough above zero signals buying pressure.
Financials (32% of the ASX 200) penetrated its rising trendline to warn of a correction. Follow-through below 5800 would indicate a test of primary support at 5300.
Materials (18% of the index), on the other hand, rallied strongly after respecting support at 12500. Follow-through above 13500 would signal another advance.
I would be cautious of any breakout on the ASX 200 and would wait for retracement (respecting the new support level) to confirm the advance.
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.