The gauge on the left indicates bull or bear market status, while the right reflects stock market drawdown risk.
Bull/Bear Market
The ASX Bull-Bear Market indicator remains at 54%, signaling a mild bear market.
Three of the six indicators from Australia and China (our largest trading partner) signal risk-off. These have a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index, also unchanged, makes up the remaining 40%.
The ASX 200 Financials index ($XFJ) threatens to break out above 9260 on the weekly chart. A higher close would signal a new uptrend, reversing the bear signal from March 7, 2025.
Also, China’s NBS manufacturing PMI improved to 49.5 in May. A decrease below 49 would have triggered a recession signal.
However, Australian private dwelling approvals are weakening. The 3-month moving average at 15.2K is close to reversing below its red signal line (15.1K), which would trigger a recession signal.
Stock Pricing
ASX stock pricing increased to 80.75 percent, from a low of 67.85 seven weeks ago, approaching the high of 85.83 in February 2025. The reading above 80 percent signals that stock pricing is back in the extreme range.
Conclusion
The ASX signals a mild bear market, but the risk of a significant drawdown is now extreme.
Acknowledgments
- NAB Monthly Business Survey: April 2025
- ABS: Private Dwelling Approvals
- Trading Economics: China Business Indicators
- Morningstar: ASX All Ords & ASX 20 Statistics
- Market Index: ASX Statistics
- ABS: National Accounts
- ASX: Historical Market Statistics
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.