The ASX 200 broke primary support level at 7000, confirming a bear market.
Long-term interest rates are rising, with bond ETFs falling.
A-REITs respected resistance at the former primary support level of 1500, confirming the primary down-trend. Trend Index peaks below zero warn of strong selling pressure.
Financials fell dramatically last week, testing primary support at 6000, as the prospect of falling residential property prices and rising defaults looms. Higher interest rates and wider net interest margins should offset this to some extent. Expect retracement to test resistance at 6000. Follow-through below this level would confirm a primary down-trend and strengthen the overall bear market (Financials have been one of the stronger sectors).
Consumer Discretionary respected resistance at 3000, signaling another decline with a target of 2600 [3000-400]. Trend Index peaks below zero warn of strong selling pressure.
Consumer Staples broke support at 13K, with respect of the new resistance level warning of another test of 12K.
Utilities continue their primary up-trend, rising Trend Index troughs indicating strong buying pressure.
Industrials are headed for another test of support at 6350. Breach would warn of another test of primary support at 6000.
Telecommunications broke support at 1400, signaling a primary down-trend. Trend Index peaks below zero warn of strong selling pressure. Breach of support offers a target of 1200 [1400-200].
Health Care is consolidating below 42.5K. Reversal below 40K would warn of another test of primary support at 37.5K. A Trend Index peak close to zero would warn of fading buyer interest.
Information Technology continues in a primary down-trend, with Trend Index peaks below zero warning of selling pressure. Follow-through below 1400 would offer a target of 1100 [1500-400].
The Energy sector is advancing strongly, while Trend Index troughs above zero signal buying pressure. The prospect of Chinese lockdowns easing is likely to boost demand for oil and gas, sending prices soaring.
Metals & Mining respected resistance at 6250, warning of another test of 5500. Declining Trend Index peaks suggest buyer interest is fading. Respect of support at 5500 would signal that the up-trend is intact but breach seems more likely and would offer a target of the November ’21 low at 4750.
The broad DJ Industrial Metals Index respected resistance at 200, while Trend Index peaks below zero warn of strong selling pressure. Easing of lockdowns in China may increase demand but a bear market remains likely.
Iron ore is also undergoing a correction. Breach of support at 125 would warn of another test of primary support at 90.
The All Ordinaries Gold Index is again testing support at 6000, while Trend Index below zero warns of selling pressure.
The price of Gold in Australian Dollars, however, is trending upwards, with rising Trend Index troughs indicating increased interest from buyers. Expect a test of A$2800 per ounce. Breakout would offer a target of A$3400 [2800 + 600].
Conclusion
ASX 200 broke support at 7200, confirming a bear market. Rising long-term interest rates and a poor global economic outlook are expected to weaken most sectors, while easing of China’s lockdown restrictions should provide some relief to energy and metals.
Our weighting for ASX sectors is:
- A-REITs: heavily underweight
- Financials: neutral
- Staples: neutral
- Discretionary: heavily underweight
- Utilities: overweight
- Industrials: neutral
- Telecommunications: underweight
- Health Care: neutral
- Information Technology: heavily underweight
- Energy: heavily overweight
- Iron ore & Base Metals: underweight
- Critical Materials (e.g. Lithium and Rare Earth Elements): heavily overweight
- Gold: overweight