The ASX 200 broke resistance at 6800, signaling a fresh advance. Expect retracement to test the new support level; respect would strengthen the bull signal.
Primary driver of the advance is resources. Talk of an imminent phase 1 US-China trade deal lifted iron ore, which is now testing resistance at 95. Expect retracement to test primary support at 80 but respect would confirm that a base has formed.
The ASX 300 Metals & Mining index is advancing in step with iron ore prices, with a short-term target of 4800.
Financials remain weak, with the ASX 300 Banks index ranging in a bearish narrow band between 7200 and 7500. Respect of the descending trendline would warn of another decline, with a short-term target of 7000.
The ASX 200 REITs index recovered after a false break below 1580, with a short-term target of 1680.
We maintain a focus on defensive and contra-cyclical (gold) sectors because of our bearish outlook for the Australian and global economy.
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.