The ASX 200 jumped sharply yesterday but ran into resistance at 7800 today. Declining peaks on the Trend Index warn of secondary selling pressure and another test of support at the recent lows (orange line) is likely.
The 6-month chart shows the up-trend losing momentum. Breakout above 7900 is less likely but would offer a target of 8200.
Economy
The real cash rate (cash rate minus CPI) remains close to zero, reflecting easy monetary policy despite rate hikes in 2023.
But declining credit growth warns that economic growth is slowing.
Consumer sentiment is lower than in the 2008 financial crisis — the result of high inflation from negative real interest rates after the pandemic.
Sectors
The 6-month chart of Financials shows the up-trend losing momentum, as with the ASX 200.
Net interest margins of the major banks remain under pressure.
Consumer Staples are in a down-trend after breaking primary support (red below). Trend Index peaks at zero warn of selling pressure.
A-REITs are still in an up-trend but declining Trend Index peaks warn of selling pressure.
Health Care threatened a primary down-trend after breaking support at 42K but has since recovered — a bullish sign.
Consumer Discretionary is also losing momentum — similar to Financials.
Telecommunications are in a strong down-trend, with the Trend Index breaking below zero.
Information Technology is outperforming, with accelerating trendlines and rising Trend Index troughs above zero.
Utilities is another bright star, displaying similar accelerating trendlines and rising Trend Index troughs above zero.
Energy is testing primary support at 10K with a bearish Trend Index declining below zero.
The ASX 300 Metals & Mining index is attempting a recovery. Breakout above 6100 would be a bullish sign, while respect would warn of another test of primary support at 5600.
The All Ordinaries Gold index is in a strong up-trend. Respect of support at 7500 would signal another advance with a target of 8500. Breach of support, however, would signal another test of 7000.
Conclusion
The ASX 200 is losing momentum. So are Financials, A-REITs and Consumer Discretionary.
Staples and Telecommunications are in a down-trend and likely to be joined by Energy.
Health Care and Metals & Mining show signs of recovery but further confirmation is needed.
The All Ordinaries Gold index is in a strong up-trend. Respect of support at 7500 would confirm another advance but breach of support, while less likely, would test 7000.
Acknowledgements
- RBA Chart Pack: 8 May 2024
