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 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.