Tag: ASX 300 Banks Index

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ASX selling pressure despite iron ore rally

Iron ore roared back, breaking resistance at $60. But this is a bear market. Also port inventories are climbing, while housing price growth is slowing. Expect another test of support at $50 is likely. Breach would signal another decline.

Iron Ore

The ASX 300 Metals & Mining index rallied off support at 2750 but is likely to respect resistance at 3000. Breach of 2750 would signal a primary down-trend.

ASX 300 Metals & Mining

The ASX 300 Banks index also rallied but is likely to respect 8500. Breach of 8000 would confirm the primary down-trend.

ASX 300 Banks

The ASX 200 displays strong selling pressure, with Twiggs Money Flow dipping below zero for the second time. Follow-through below 5700 would test primary support at 5600. Breach of 5600, while not yet a high probability, would complete a broad head and shoulders reversal.

ASX 200

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Bearish outlook for the ASX

Iron ore rallied slightly during the week. But this is a bear market. Expect resistance at $60 to hold and breach of support at $50 is likely, signaling another decline.

Iron Ore

The ASX 300 Metals & Mining index is testing support at 2750. Breach is likely and would signal a primary down-trend.

ASX 300 Metals & Mining

Banks are also under pressure, with the ASX 300 Banks index consolidating between 8000 and 8500. Breach of 8000 is likely and would confirm the primary down-trend.

ASX 300 Banks

The ASX 200 displays a broadening wedge consolidation. A failed down-swing, recovering above 5800 without reaching the lower border, would be a bullish sign. But this seems unlikely with a bearish outlook for the two largest sectors.

ASX 200

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ASX banks and iron ore drag the index lower

Last week I wrote: “I believe that the latest rally is a secondary reaction and that the ASX is headed for a down-turn, with miners and banks leading the way. But it’s no use arguing with the (ticker) tape.” This week the ticker tape backs up my bearish sentiment, so I am a lot more comfortable.

Iron ore continues to fall, headed for a test of 50.

Iron Ore

Banks’ bear market rally also petered out, with the ASX 300 Banks index headed for a test of support at 8000. Breach would confirm the primary down-trend.

ASX 300 Banks

The ASX 200 broke support at 5700. Declining Twiggs Money Flow signals selling pressure. Breach of primary support at 5600 would warn of a primary down-trend.

ASX 200

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Australia: ASX rallies

Iron ore is falling.

Iron Ore

And the broader DJ-UBS Commodity Index is testing support at 82. Breach would signal a decline to test the 2015 low at 74.

DJ-UBS Commodity Index

But the Aussie Dollar rallied Friday, the large engulfing candle suggesting another test of resistance at 75 US cents.

AUDUSD

Miners finished strongly, with the ASX 300 Metals & Mining index reflecting short-term buying pressure. 13-Week Twiggs Money Flow recovered above zero.

ASX 300 Metals & Mining

The ASX 200 is testing resistance at 5800. A 21-day Twiggs Money Flow trough above zero indicates medium-term buying pressure. Breakout above 5800 is likely and would suggest another test of 5950/6000.

ASX 200

Banks also rallied, with the ASX 300 Banks index headed for a test of 8500. Expect strong resistance.

ASX 300 Banks

Perhaps this UBS report had something to do with it.

I believe that the latest rally is a secondary reaction and that the ASX is headed for a down-turn, with miners and banks leading the way. But it’s no use arguing with the (ticker) tape.

A prudent speculator never argues with the tape. Markets are never wrong, opinions often are.

~ Jesse Livermore

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ASX retreats as iron ore breaks support

Iron ore broke support at $60, signaling another decline. The medium-term target is $50*.

Iron ore

* Target: 60 – ( 70 – 60 ) = 50

Resources stocks lost momentum, with the ASX 300 Metals & Mining index respecting resistance at 3000. Twiggs Money Flow seemed to be recovering after a strong bearish divergence but has again slipped below zero, warning of selling pressure. Expect another test of primary support at 2700.

ASX 300 Metals & Mining

The big banks face selling pressure, with Twiggs Money Flow falling sharply. The primary down-trend on the ASX 300 Banks Index, having broken support at 8500, offers a medium-term target of 8000*.

ASX 300 Banks

* Target: 8500 – ( 9000 – 8500 ) = 8000

The ASX 200 respected resistance at 5800. Breach of 5700 is likely and would confirm another test of primary support at 5600*. Breach of 5600 would signal a primary down-trend, offering a target of 5200*.

ASX 200

* Target medium-term: 5600 – ( 6000 – 5600 ) = 5200

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ASX banks break support

The big banks fell sharply on the week’s turmoil, with the ASX 300 Banks Index breaking support at 8500. Breach signals a primary trend reversal, offering a medium-term target of 8000*.

ASX 300 Banks

* Target: 8500 – ( 9000 – 8500 ) = 8000

Resources stocks rallied over the week. Expect strong resistance on the ASX 300 Metals & Mining index at 3000.

ASX 300 Metals & Mining

Iron ore continues in a bearish narrow consolidation above support at $60. Breach would offer a short-term target of $50*.

Iron ore

* Target: 60 – ( 70 – 60 ) = 50

These are ominous signs for the ASX 200 which is testing medium-term support at 5700. A sharp fall on Twiggs Money Flow flags strong selling pressure. Breach of primary support at 5600* would signal a reversal, offering a target of 5200*.

ASX 200

* Target medium-term: 5600 – ( 6000 – 5600 ) = 5200

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ASX 200 bearish consolidation

The big banks fell sharply on news of a new levy on bank liabilities in the latest budget. At this stage the ASX 300 Banks Index merely shows a secondary reaction. Breach of 8500, however, would signal a primary trend reversal, offering a medium-term target of 8000*.

ASX 300 Banks

* Target: 8500 – ( 9000 – 8500 ) = 8000

Resources stocks compensated, with the ASX 300 Metals & Mining Index rallying to test resistance at 2850/2900. Breakout is unlikely given the weak lead from iron ore. Reversal below 2700 remains likely and would strengthen the bear signal for resources.

ASX 300 Metals & Mining

Iron ore formed a bearish consolidation above support at $60. Breach would offer a short-term target of $50*.

Iron ore

* Target: 60 – ( 70 – 60 ) = 50

Selling of the Aussie Dollar continues, with a medium-term test of primary support at 71.50/72.00 now likely.

Aussie Dollar

Consolidation of the ASX 200 above support at 5800 is a bearish pattern. Breach would signal a correction to test primary support at 5600*. Twiggs Money Flow still indicates long-term buying pressure and only a fall below zero would warn of a reversal.

ASX 200

* Target medium-term: 5800 – ( 6000 – 5800 ) = 5600

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2 More Warning Signs for the ASX

The recent Iron ore rally has faded and the commodity is again testing support at $60. Twiggs Momentum (13-week) below zero indicates a primary down-trend.

Iron ore

The ASX 300 Metals & Mining Index broke support at 2850, warning of a down-trend. A Twiggs Money Flow peak below zero flags strong selling pressure.

ASX 300 Metals & Mining

Falling ore prices will place strong downward pressure on the ASX and the Aussie Dollar.

Aussie Dollar

ASX 300 Banks Index retreated below 9000. Declining Twiggs Money Flow indicates medium-term selling pressure. Follow-through below 8900, or Twiggs Money Flow below zero, would warn of a correction.

ASX 300 Banks

The large red engulfing candle on the weekly ASX 200 chart also warns of a (secondary) reversal. Breach of support at 5800 would signal a correction. Twiggs Money Flow still shows long-term buying pressure and only a fall below zero would warn of a market top (primary trend reversal).

ASX 200

* Target medium-term: 5800 + ( 5800 – 5600 ) = 6000

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ASX stalls at 5800

Banks have run into resistance, with the ASX 300 Banks Index retreating below 9000. The recent false break (above 9000) is a mildly bearish sign but the long-tail on this week’s candle is mildly bullish. Follow-through above 9100 remains more likely and would signal an advance to 9500*.

ASX 300 Banks

* Target medium-term: 9000 + ( 9000 – 8500 ) = 9500

This is not a criticism of the policy, but recent rate hikes on investor mortgages become a self-fulfilling prophecy. Concerns about the housing market lead banks to hike rates. Higher rates discourage new borrowing, leading to a contraction in demand. Which in turn leads to lower house prices.

Miners continue their downward path. The ASX 300 Metals & Mining Index has broken its long-term rising trendline, while Declining Twiggs Money Flow peaks below zero warn of strong selling pressure.

ASX 200

With its two biggest sectors meeting resistance, the ASX 200 is stuck at 5800. But rising troughs on Twiggs Money Flow (above zero) signal buying pressure. Breakout above 5800 is likely and would signal a test of 6000*. Reversal below 5600 is unlikely but would warn of a correction.

ASX 200

* Target medium-term: 5800 + ( 5800 – 5600 ) = 6000

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ASX banks lead the charge

The ASX 200 followed-through above 5750 after respecting its new support level at 5600, indicating an advance to 6000*. Rising Twiggs Money Flow signals buying pressure.

ASX 200

* Target medium-term: 5800 + ( 5800 – 5600 ) = 6000

Australian banks are leading the charge, with the ASX 300 Banks Index testing 9000. A trough high above zero on Twiggs Money Flow indicates strong buying pressure. Breakout above 9000 would signal another advance.

ASX 300 Banks Index

Bank profits have declined for the last two years, but Bad and Doubtful Debt Charges are not a major cause.

RBA Chart Pack: Bank Profits and Bad Debt Expenses

The main culprit is declining return on equity as banks beefed up capital ratios and risk-weighting on residential mortgages in response to pressure from APRA.

RBA Chart Pack: Bank Return on Equity

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