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ASX risk-on

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The ASX 200 followed through above 6400, signaling another test of the February high at 7100. Expect retracement to test the new support level at 6200. Rising Trend Index troughs indicate buying pressure.

ASX 200

The train has left the station ahead of time, with the ASX 300 Banks index follow-through above 6300 confirming a target of 7200 for the current advance (5200 trough extended above the 6200 peak). Rising Trend Index troughs again signal buying pressure. We expect a tough time in 2021 when government stimulus expires but will cautiously increase our weighting to the big four banks.

ASX 300 Banks

The ASX 300 Metals & Mining index, on the other hand, continues to warn of selling pressure, with tall shadows on weekly candles and Trend Index peaks below zero. Breach of support at 4400 would signal another decline with a short-term target of 4000 (peak at 4800 extended below support at 4400).

ASX 300 Metals & Mining

Conclusion

The ASX is experiencing a relief rally that, apart from Metals & Mining, is expected to carry through into the New Year. We remain cautious of banks, and bearish on iron ore, but bullish on Gold.

Quote for the Week

When the level of optimism is high, there is usually more room for disappointment.

~ Howard Marks

Disclaimer

Colin Twiggs is director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.

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