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