ASX 200 Forecast: Miners Lift Index As PMI Rebound and Lower Yields Ease Pressure

ASX 200 Heat Map: BHP and Rio Lead as REA Sells Off

Miners did the heavy lifting in the day’s trading session. BHP is up 3.09% and Rio Tinto is up 3.19%, providing the ASX 200 Index with a decent backbone. This is the best trading day in 6 weeks. But not all stocks were green. REA Group is down around 3.67%, and that weakness fits with fresh pressure around Australia’s housing outlook after reports that Morgan Stanley expects a 5-10% national property price correction following proposed negative gearing and CGT changes.

Nonetheless the ASX 200 was up over 1.25% during the trading session. Short term market breadth continues to improve with about 48% of stocks in the ASX 200 Index above their 20-day MA.

ASX 200 Heat Map Shows Heavyweight Miners BHP And Rio Tinto Up More Than 3%, While REA Group Appears To Drag Commercial Services Lower

Australia Manufacturing PMI Pushes Back Into Further Expansion

The S&P Global Manufacturing PMI Flash came in at 51.3, up from 50.2, so the sector is still expanding and with a bit more force than before. This should bode well for the ASX 200 Index as it suggests the domestic growth backdrop isn’t rolling over, which can help industrials, materials, logistics, and bank sentiment at the margin.

S&P Global Australia Manufacturing PMI Rose to 51.3 in May, Moving Further Above The 50 Expansion Line

Australia Services PMI Returns to Expansion

The S&P Global Services PMI Flash rose to 50.7, up from 47.7, which puts services activity back into expansion after slipping into contraction. Banks, consumer discretionary, REITs, and broader domestic cyclicals in the ASX 200 Index should like the growth isn’t dead message.

S&P Global Australia Services PMI Flash Rose to 50.7 in May, Rebounding From 47.7 And Moving Back Above the 50 Expansion Line

Australia 10-Year Yield Breaks Lower, Easing Pressure on ASX 200 Index

After attempting a 3rd time to break through that 5.175% resistance level, the Australia 10-year yield seems to have failed. For now. Yields fell below the 50-SMA on the Renko with the Supertrend flipped to negative. RSI is below 50 and the Z-Score SMA is trending lower, although near oversold levels. All in all yields need a break from rising it seems. The medium to long term trend appears still intact.

Australia 10-Year Yield 0.025-Brick Renko Shows Yields Slipping Below the 50-SMA As Momentum Weakness

ASX 200 Renko Rebound Attempting to Test 500-SMA Resistance

The ASX 200 has some respite with it crossing back above its 50-SMA and a positive Supertrend on the Renko. The 8,480-8,495 is acting as a support zone in the short term. Moreover, the RSI is also above 50. What’s a bit concerning to me is the Z-Score SMA. It has turned lower. So the momentum is not quite there yet.

ASX 200 20-Brick Renko Shows Price Holding Above the 50-SMA, But Still Capped Below the 500-SMA

The Verdict

Current Trend Direction: Bearish

Bias: Negative

Support Levels: 8,255

Resistance Levels: 8,880, 9,230

Medium Term Path: I’m seeing a bit of a double bottom in the ASX 200 Index. So there is some alleviation in declines in the Index. But it needs to get back above the 500-SMA in the Renko. That’s the first step. Thereafter we need to see some rallies above the 8,880 level for me to change my bias and trend direction on the ASX 200 Index.