ASX: Steam or froth?

The ASX 200 broke resistance at 5500. Follow-through above 5600 would confirm a primary advance with a long-term target of 6000*. Rising Twiggs Money Flow indicates medium-term buying pressure.

ASX 200

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

The ASX 300 Banks Index has followed through after breaking resistance at 8000. Expect retracement to test the new support level but respect is likely.

ASX 300 Banks

What could go wrong?

….Apart from a precarious property bubble in China fueling commodity exports, a property bubble in Australia fueled by record low interest rates and equally precarious immigration flows, declining business investment and slowing wages growth.

The ASX price-earnings ratio is close to historic highs, suggesting we are in Phase III of a bull market — where stocks are advanced on hopes and expectations of future growth rather than on concrete results. By all means follow the rally, but keep your stops tight.

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