The ASX 200 retreated sharply from stubborn resistance at the 2007 high of 6800, like hitting a brick wall. Breach of support at 6400, after a lower high, is now more likely and would offer a target of 5400.
Iron ore continues to test short-term support at $90. Breach is likely and would signal another decline, with a medium-term target of $80 per ton.
The ASX 300 Metals & Mining index is headed for a test of long-term support at 4100. Breach would complete a head and shoulders reversal, with a target of 3400.
The Financial sector retreated sharply from resistance at 6500. Expect a test of primary support at 6000. Breach would signal a primary decline, with a target of 5200.
We maintain exposure to Australian equities at 25% of portfolio value, with a focus on defensive and contra-cyclical stocks, because of our bearish long-term outlook.
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.