The ASX 200 found support at 6120/6150, with a long tail indicating buying interest. Follow-through above 6250 would suggest another advance. Breach is now unlikely but would warn of a test of the rising long-term trendline at 6000.
A rally on resources stocks helped support the overall index. Expect the ASX 300 Metals & Mining index to test 4000.
Miners were helped by a weakening Aussie Dollar. Breach of support at 71 US cents offers a target of 69 cents. Trend Index peaks below zero warn of strong selling pressure.
Banks, on the other hand, are weakening. The ASX 300 Banks index broke support at 7700, with a declining Trend Index warning of selling pressure. Expect a test of primary support at 7300.
Falling broad money and credit growth warn of a contraction — unless an unlikely Chinese-led mining boom can keep the wolf from the door.
House prices are falling.
Returns on bank equity are declining due to increased capital requirements, lower credit growth and narrow margins.
I remain cautious on Australian stocks, holding over 30% cash in the Australian Growth portfolio.
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.