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 at 64% reflects a mild bull market.
Four out of six indicators from Australia and China (our largest trading partner) signal risk-on. 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 OECD composite leading indicator for China improved to 100.4 in May, well above the 99 warning level for a contraction.
However, NAB forward orders continue to warn of a contracting Australian economy in May, although the pace of the decline has slowed.
Australian private dwelling approvals are also weak. The 3-month moving average for April, at 15.2K, is close to its red signal line, at 15.1K, which signals risk-off.
Stock Pricing
ASX stock pricing increased to 86.19 percent, exceeding the high of 85.83 in February 2025, from a low of 67.85 nine weeks ago. The reading warns that stock pricing is extreme.
Conclusion
The ASX signals 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 20 Statistics
- S&P Global Indices: All Ordinaries 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.