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.
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.
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.
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.
Iron ore found support at $60.
The ASX 300 Metals & Mining Index has taken some encouragement from the rally, with support at 2850. But bear rallies are normally short in duration and reverse sharply.
The ASX 200 advance has slowed after the recent sell-off in the resources sector. But rising Twiggs Money Flow still signals buying pressure and another attempt at 6000 seems likely.
* Target medium-term: 5800 + ( 5800 – 5600 ) = 6000
ASX 300 Banks, the largest sector in the broad index, is consolidating above its new support level at 9000. Declining Twiggs Money Flow warns of medium-term selling pressure. Reversal below 8900 is unlikely but would warn of a correction.
Bank exposure to residential mortgages is the Achilles heel of the Australian economy and APRA is likely to keep the pressure on banks to raise lending standards and increase capital reserves, which would lower return on equity.
The ASX 200 encountered resistance at 5300 and is likely to test support at 4900/5000, with breach of the lower trend channel and declining 13-week Money Flow warning of selling pressure. Breach of support at the recent low of 5050 would confirm.
The Banks are weighing on the index, with APRA warning of further capital increases and concerns over a slowing housing market, particularly apartments. The ASX 300 Banks Index is testing primary support at 7200. Breach would offer a target of 6400*. Weakness in this sector is likely to affect the entire market.
* Target calculation: 7200 – ( 8000 – 7200 ) = 6400