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 increased from 54% to 64%, returning to a mild bull market.
Four of six indicators from Australia and China (our largest trading partner) now signal risk-on. These have a combined weighting of 60% in the ASX Bull-Bear Index. The US Bull-Bear Index, unchanged, makes up the remaining 40%.
The ASX 200 Financials index ($XFJ) closed above 9260, signaling risk-on, and reversing the bear signal from March 7, 2025.
However, Australian private dwelling approvals remain weak. The 3-month moving average at 15.2K for April is close to its red signal line at 15.1K. A cross below would signal risk-off.
Stock Pricing
ASX stock pricing jumped to 85.73 percent, from a low of 67.85 eight weeks ago, approaching the high of 85.83 from February 2025. The reading warns that stock pricing is in the extreme range.
A 20% trimmed mean of forward PE for the ASX 20 reached a new high of 22.57.
Conclusion
The ASX signals a return to a mild bull market, but valuations are now extreme, increasing the risk of a significant drawdown.
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.