Tag: ASX 300 Banks

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ASX 200 retreats

The two largest sectors in the ASX 200 are both retreating from recent highs.

The ASX 300 Metals & Mining index is testing support at 3750. Breach of support and the rising trendline would warn of a test of primary support at 3400.

ASX 300 Metals & Mining

The ASX 300 Banks index reversed below its short-term support level at 8000, warning of a test of primary support at 7300.

ASX 300 Banks Index

The banking sector faces the prospect of higher funding costs, falling credit growth and rising default risk and I remain cautious despite penetration of the descending trendline which suggests that a bottom is forming.

The ASX 200 retreated from resistance at 6300. Breach of short-term support at 6200 would warn of a correction.

ASX 200

The primary trend is upward but economic indicators warn of rising headwinds and a potential bear market. I remain cautious, with more than 30% cash in the Australian Growth portfolio.

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Banks lift ASX 200

The ASX 300 Banks index continues to test resistance at 8000. Respect remains likely and would indicate another test of primary support at 7300.

ASX 300 Banks Index

Rising banks lifted the ASX 200. Follow-through above 6250 signals another primary advance, with a target of the October 2007 high at 6750.

ASX 200

This leaves me in a difficult position. Technical signals suggest a primary advance, while economic indicators warn of rising headwinds and a potential bear market.

Banks

The banking sector is being squeezed by higher funding costs, falling credit growth and rising default risk.

Gerard Minack from Minack Advisers warns that the current credit contraction could cause a significant fall in housing prices:

Most houses are bought on credit, so the demand for housing is a function of the supply of credit. Consequently, housing loan approvals have historically led house prices. New loan approvals have fallen by around 20% year-over-year several times over the past 25 years. If the current credit contraction is more severe – say, a decline of up to 30% – then nationwide house prices could fall high single digits over the coming year.

….All this suggests that a high single-digit decline in house prices would put a material dent in domestic demand. If prices were to fall by, say, 15%, and if consumer income growth was as tepid as it now is, there would be a good chance of recession.

Resources

A falling Chinese Yuan highlights the threat of trade tariffs to the Chinese economy.

CNY/USD

Commodity prices have responded, falling to test primary support levels.

DJ-UBS Commodity Index

Including iron ore.

Iron Ore

The ASX 300 Metals & Mining index is testing medium-term support at 3800. Breach is likely and would warn of a correction to test the rising trendline.

ASX 300 Metals & Mining

My approach is to sit with one foot either side of the fence. Focus on growth sectors. Stay away from Banks. Stay away from Resources but stay in Gold. And keep a healthy percentage of the Australian portfolio in Cash and reasonably secure interest-bearing investments. Definitely not hybrids.

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ASX 200: China threat

A rapidly falling Chinese Yuan highlights the threat of trade tariffs to the Chinese economy.

CNY/USD

Expect another sell-off of foreign reserves by China, as in 2015 to 2016, in attempt to stabilize the Yuan and head-off a major capital exodus. The sell-off would weaken the Dollar and Chinese exports.

China Foreign Reserves

Significant monetary easing by the PBOC is also likely, to stimulate domestic demand. Driving the Debt-to-GDP ratio into the stratosphere.

The Aussie Dollar would act as a shock-absorber, following the path of the Yuan.

AUD/USD

Cushioning the blow to Australian exporters.

So far, Resources stocks are unfazed. The ASX 300 Metals & Mining index is consolidating below 4000.

ASX 200

The ASX 300 Banks index ran into stiff resistance at 8000. Expect another test of primary support at 7300 but this is not related to trade tariffs.

ASX 300 Banks Index

The ASX 200 appears unperturbed by the international turmoil, retracing calmly to test its new support level at 6150. Respect would signal another primary advance, with a target of the October 2007 high at 6750.

ASX 200

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Bi-polar ASX continues

Banks continue to threaten mayhem, with the ASX 300 Banks Index headed for a target of its 2016 low at 7200.

ASX 300 Banks

The second biggest industry group, Metals & Mining Index, however, remains in a primary up-trend. A long tail on the ASX 300 Metals & Mining weekly chart reflects support at 3800 and another test of 4000 is likely.

ASX 300 Banks

The ASX 200 continues to display a large bearish divergence on Twiggs Money Flow (13-week), warning of selling pressure. Breach of 5950 would warn of a test of primary support at 5650/5750.

ASX 200

I expect a gradual decline in the index unless mining falters. In which case all bets are off.

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Banks hurt the ASX

Banks face continued selling pressure as the Royal Commission progresses. The ASX 300 Banks Index broke medium-term support at 7700, confirming the primary down-trend and a target of the 2016 low at 7200.

ASX 300 Banks

Financials are the largest sector in the ASX 200. Materials, consisting of mainly Metals & Mining are second.

ASX 200
Source: S&P Dow Jones Indices

The ASX 300 Metals & Mining Index remains in a primary up-trend but threatens a correction to test the long-term rising trendline. Respect of the trendline is likely and would signal continuation of the up-trend. Breach of 3400 is unlikely but would present a bearish outlook, not only for Metals & Mining, but the entire ASX.

ASX 300 Banks

The ASX 200 is correcting to test medium-term support at 5950. Breach would warn of a test of primary support at 5750 but respect of support is just as likely. Breakout from the triangle on Twiggs Money Flow (13-week) will indicate the likely direction.

ASX 200

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Australian banks under selling pressure

The ASX 300 Banks index are a major drag on the broad market index. Having respected resistance at 8500, a test of primary support at 8000 is likely. Twiggs Trend Index peaks below zero warn of strong selling pressure.

ASX 300 Banks

Return on equity is falling.

Australian Banks Return on Equity

A combination of narrow interest margins.

Bank Net Interest Margins

Soaring household debt.

Bank Net Interest Margins

And rising capital requirements as APRA desperately tries to protect their glass jaw.

Bank Capital Ratios

Don’t let the ratios fool you. They are based on risk-weighted assets. Common Equity Tier 1 (CET1) leverage ratio for at least one of the majors is as low as 4.0 percent.

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ASX banks spoil the iron ore party

I underestimated the strength of iron ore which has now broken resistance at 70, suggesting that a bottom is forming. Strength of the latest rally indicates that the next correction is likely to find support at 60.

Iron Ore

The Resources sector responded, with the ASX 300 Metals & Mining index headed for a test of its February high at 3200 after recovering above support at 3000.

ASX 300 Metals & Mining

Banks have been on the receiving end, however, with the ASX 300 Banks index testing short-term support at 8500. A Twiggs Money Flow peak below zero warns of strong selling pressure. Breach of 8500 would signal another test of primary support at 8000.

ASX 300 Banks

The ASX 200 continues to form a narrow line, consolidating between 5600 and 5800. Declining Twiggs Money Flow, with a peak below zero, warns of selling pressure. Breach of support at 5600 remains likely, despite the iron ore rally, and would signal a primary down-trend.

ASX 200

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ASX stalls

Iron ore is testing resistance at 70. Respect would warn of another test of primary support at 53, while breakout would suggest that a bottom is forming and the next correction is likely to find support at 60.

Iron Ore

The Resources sector remains wary, with the ASX 300 Metals & Mining index retreating after a false break above resistance at 3050.

ASX 300 Metals & Mining

The ASX 300 Banks index retraced from resistance at 8800, heading for a test of the rising trendline and short-term support at 8500. Twiggs Money Flow continues to warn of selling pressure despite indications from APRA that they are unlikely to require further capital raising. Reversal below 8500 would warn of another test of primary support at 8000.

ASX 300 Banks

The ASX 200 has stalled, consolidating between 5600 and 5800 over the last two months. Declining Twiggs Money Flow, with a peak below zero, warns of selling pressure. Breach of support at 5600 is more likely, with an ensuing down-trend, but a lot depends on how iron ore behaves in the next few weeks.

ASX 200

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.

~ Mark Twain (Samuel Clemens)

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ASX 200: Banks run into strong resistance

Iron ore peaked at $60. Expect a sharp fall to test support between $50 and $52, typical of a bear market. Chinese housing price growth — a key driver of iron ore prices as illustrated last week — is slowing and likely to drag ore prices lower.

Iron Ore

The ASX 300 Metals & Mining index is still on the up but likely to respect resistance at 3000, given the reversal in iron ore. Breach of 2750 would confirm a primary down-trend.

ASX 300 Metals & Mining

The ASX 300 Banks index ran into strong resistance at 8500. Declining Twiggs Money Flow highlights selling pressure. Breach of 8000 is likely and would confirm the primary down-trend.

ASX 300 Banks

The ASX 200 displays strong selling pressure, with tall shadows on the last two weekly candles. Twiggs Money Flow dipping below zero for the second time warns of a primary down-trend. Follow-through below 5700 would test primary support at 5600. Breach of 5600 would complete a broad head and shoulders reversal, confirming a primary down-trend.

ASX 200

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Strange week on the ASX

Strange week on the ASX, with strong jobs numbers from the ABS causing a surge in the Aussie Dollar and a more optimistic outlook on the ASX.

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

Iron Ore

The ASX 300 Metals & Mining index respected resistance at 3000 and is headed for a test of primary support at 2750. Breach would confirm the primary down-trend.

ASX 300 Metals & Mining

The ASX 300 Banks index respected resistance at 8500 and is likely to test primary support at 8000. Again, breach would confirm the primary down-trend.

ASX 300 Banks

The ASX 200 has formed a broadening wedge consolidation, in a down-trend. Declining Twiggs Money Flow indicates some selling pressure. Expect a test of primary support at 5600. Again, breach would warn of a primary down-trend. But a failed swing (that respects 5700) would warn that all bets are off and the index may be preparing for a rally.

ASX 200

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