ASX 200 Narrow Line

The ASX 200 continues to consolidate in a narrow line between 5650 and 5800. Declining Twiggs Money Flow warns of selling pressure and breach of support at 5650 would signal a primary down-trend. Follow-through below 5600 would confirm. Breakout above 5800 is unlikely but would test resistance at 6000.

ASX 200

Monthly hours worked are up 1.9% over the last 12 months. Marginally below real GDP but not something to be concerned about unless growth continues to fall.

Monthly Hours Worked - Seasonally Adjusted

Iron ore continues its extended bear market rally, suggesting that the next correction is likely to find support above the primary level at 53.

Iron Ore

ASX 300 Metals & Mining is also likely to find support above 2750. Respect of support at 3000 would signal a strong up-trend.

ASX 300 Metals & Mining

The ASX 300 Banks index continues to warn of selling pressure, with declining Twiggs Trend Index and Money Flow below zero. Breach of support at 8500 would signal another test of primary support at 8000.

ASX 300 Banks

ASX 200: It’s down to iron ore

Iron ore encountered resistance at $70 per ton. Another test of primary support at $53 is likely. But a failed down-swing would be a bullish sign.

Iron Ore

The ASX 300 Metals & Mining displays a similar pattern, retreating below 3000 after testing 3050. A failed down-swing that ends above 2750 would be a bullish sign, while breach of support at 2750 would confirm the primary down-trend.

ASX 300 Metals & Mining

APRA eased pressure on the big four banks to raise more capital; the ASX 300 Banks index responding with a rally to 8800. Retracement that respects support at 8500 would be a bullish sign, signaling continuation of the up-trend. The industry is still light on capital but recent remarks by APRA chair Wayne Byres indicate that they are prepared to tolerate a more gradual adjustment rather than a new round of capital raising. Dividends may still come under pressure, however, in banks with high payout ratios.

ASX 300 Banks

ASX 200 consolidation between 5600 and 5800 continues. Declining Twiggs Money Flow flags selling pressure. Breakout from the consolidation will indicate future direction but this is likely to be dominated by mining (iron ore) and the banks. If both are pulling in the same direction, the index is likely to follow. Banks are increasingly bullish but the question-mark over iron ore remains.

ASX 200

Bearish outlook for the ASX

Iron ore rallied slightly during the week. But this is a bear market. Expect resistance at $60 to hold and breach of support at $50 is likely, signaling another decline.

Iron Ore

The ASX 300 Metals & Mining index is testing support at 2750. Breach is likely and would signal a primary down-trend.

ASX 300 Metals & Mining

Banks are also under pressure, with the ASX 300 Banks index consolidating between 8000 and 8500. Breach of 8000 is likely and would confirm the primary down-trend.

ASX 300 Banks

The ASX 200 displays a broadening wedge consolidation. A failed down-swing, recovering above 5800 without reaching the lower border, would be a bullish sign. But this seems unlikely with a bearish outlook for the two largest sectors.

ASX 200

Australia: ASX rallies

Iron ore is falling.

Iron Ore

And the broader DJ-UBS Commodity Index is testing support at 82. Breach would signal a decline to test the 2015 low at 74.

DJ-UBS Commodity Index

But the Aussie Dollar rallied Friday, the large engulfing candle suggesting another test of resistance at 75 US cents.

AUDUSD

Miners finished strongly, with the ASX 300 Metals & Mining index reflecting short-term buying pressure. 13-Week Twiggs Money Flow recovered above zero.

ASX 300 Metals & Mining

The ASX 200 is testing resistance at 5800. A 21-day Twiggs Money Flow trough above zero indicates medium-term buying pressure. Breakout above 5800 is likely and would suggest another test of 5950/6000.

ASX 200

Banks also rallied, with the ASX 300 Banks index headed for a test of 8500. Expect strong resistance.

ASX 300 Banks

Perhaps this UBS report had something to do with it.

I believe that the latest rally is a secondary reaction and that the ASX is headed for a down-turn, with miners and banks leading the way. But it’s no use arguing with the (ticker) tape.

A prudent speculator never argues with the tape. Markets are never wrong, opinions often are.

~ Jesse Livermore

ASX retreats as iron ore breaks support

Iron ore broke support at $60, signaling another decline. The medium-term target is $50*.

Iron ore

* Target: 60 – ( 70 – 60 ) = 50

Resources stocks lost momentum, with the ASX 300 Metals & Mining index respecting resistance at 3000. Twiggs Money Flow seemed to be recovering after a strong bearish divergence but has again slipped below zero, warning of selling pressure. Expect another test of primary support at 2700.

ASX 300 Metals & Mining

The big banks face selling pressure, with Twiggs Money Flow falling sharply. The primary down-trend on the ASX 300 Banks Index, having broken support at 8500, offers a medium-term target of 8000*.

ASX 300 Banks

* Target: 8500 – ( 9000 – 8500 ) = 8000

The ASX 200 respected resistance at 5800. Breach of 5700 is likely and would confirm another test of primary support at 5600*. Breach of 5600 would signal a primary down-trend, offering a target of 5200*.

ASX 200

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

ASX 200 bearish consolidation

The big banks fell sharply on news of a new levy on bank liabilities in the latest budget. At this stage the ASX 300 Banks Index merely shows a secondary reaction. Breach of 8500, however, would signal a primary trend reversal, offering a medium-term target of 8000*.

ASX 300 Banks

* Target: 8500 – ( 9000 – 8500 ) = 8000

Resources stocks compensated, with the ASX 300 Metals & Mining Index rallying to test resistance at 2850/2900. Breakout is unlikely given the weak lead from iron ore. Reversal below 2700 remains likely and would strengthen the bear signal for resources.

ASX 300 Metals & Mining

Iron ore formed a bearish consolidation above support at $60. Breach would offer a short-term target of $50*.

Iron ore

* Target: 60 – ( 70 – 60 ) = 50

Selling of the Aussie Dollar continues, with a medium-term test of primary support at 71.50/72.00 now likely.

Aussie Dollar

Consolidation of the ASX 200 above support at 5800 is a bearish pattern. Breach would signal a correction to test primary support at 5600*. Twiggs Money Flow still indicates long-term buying pressure and only a fall below zero would warn of a reversal.

ASX 200

* Target medium-term: 5800 – ( 6000 – 5800 ) = 5600

Falling iron ore weighs on Resources stocks

Iron ore broke support at 70. Follow-through below the rising trendline would warn that the up-trend is weakening.

Iron Ore

Australian resources stocks, represented here by the ASX 300 Metals & Mining Index [$XMM], reflect strong selling pressure with a bearish divergence on Twiggs Money Flow. Follow-through below 2850 would warn of a (primary) reversal.

ASX 300 Metals & Mining Index