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 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.