ASX 200 Bearish Setup Deepens as Building Permits Slide

These days, the ASX 200 isn’t moving with swagger. Building permits fell harder than expected and the weekly chart has flipped into a downtrend. The daily chart is showing that the Index fell back under the 21-EMA, and the Renko bricks lost the 500-SMA. That’s alot of red flags. Might need to be underweight Australian stocks as the Index has a heavy setup. Demand needs to take the price back above 8,915 for the ASX 200 to look more like a market that wants to return to all time highs.

Australia Building Permits Slide Adds Pressure to ASX 200

ASX 200 isn’t being helped by the latest economic data release. Building permit approvals fell 10.5% month over month, a little less than the -9.9% forecast, and that’s a clear cooling signal for the housing and construction pipeline after April’s jump. One bad print doesn’t wreck the whole market, but it does add pressure to the rate sensitive parts of the ASX 200. On the brighter side softer housing activity could ease some inflation pressure over time, which may reduce the need for the RBA to lean too aggressively. But right now, with the ASX 200 already trading a bit heavy under key technical resistance, this data feels more like another drag than a catalyst.

Australia Building Permits Fall Harder Than Expected

Bar Chart Showing Australia Building permits Month-Over-Month

Source: TradingView

ASX 200 Weekly Downtrend Deepens

There’s a downtrend generated on the weekly chart of the ASX 200 Index. The Index is below both its short and long term Supertrend. Supply has crept back in this market. Moreso the recent candles suggest the Index’s struggling to get back momentum after failing to break 9,230 resistance. The tape is tired, and if 8,600 gives way, the bigger support zone near 8,255 comes back into play fast.

ASX 200 Weekly Chart Stalls Below Supertrend Resistance

Weekly ASX 200 Candlestick Chart

Source: TradingView

ASX 200 Slips Below 21-EMA as Momentum Weakens

Price is back below the 21-EMA for the ASX 200 Index.That’s a problem. The 21-EMA is back to acting like overhead resistance rather than support. The rebound from 8,255 was strong no doubt and it pushed all the way toward 9,062.9, but there’s no follow through. Only down candles. Choppy tape. Demand hesitation. The RSI below 50 backs that up too. This is a cautious outback with 8,600 – 8,550 as the immediate support zone and 8,770-8,850 as the 1st resistance wall. Bulls need to get back above that EMA quickly. Otherwise the market could start sniffing back toward 8,255 again.

ASX 200 Daily Candlestick Chart Showing Price Trading Below 21-EMA with Weakening RSI

Daily ASX 200 Candlestick Chart

Source: TradingView

ASX 200 Renko Breakdown Keeps Sellers in Control

The Renko isn’t bullish. Nope. Not at all. The bricks rolled back below the 500-SMA and that’s a problem because the SMA is now acting like a ceiling rather than a launchpad. The Supertrend also flipped red as well. Also, the RSI is closer to 40 than to 50. One positive is that the Z-Score SMA is off oversold territory and is trending higher. But the supply is there and in our face.

ASX 200 15-Brick Renko Slips Below 500-SMA

ASX 300 25-Brick Renko

Source: TradingView

The Verdict

Current Trend Direction: Bearish

Bias: Negative

Support Levels: 8,255

Resistance Levels: 8,915, 9,230

Medium Term Path: I see a mover lower for the ASX 200 Index. The weekly Supertrend is bearish, the daily chart is back under the 21-EMA and the Renk bricks are below the 500-SMA, so the cleaner read is that rallies are selling opportunities. Not pretty. If 8,600-8,550 fails, the Index likely starts drifting back toward 8,255, and that’s a huge move lower. But a hold there could spark another rebound, but until price gets back above 8,915, then makes a serious run at 9,230, the ASX 200 looks tired, heavy, and still stuck in a bearish medium term structure.