ASX 200 Forecast: Softer Inflation Helps But 500-SMA Blocks Further Rally

ASX 200 Index Heat Map: Miners and Growth Led, Banks Dragged

Goodman Group was up 3.73% and that move fit with the AI/data-centre theme still getting attention globally. South32 was up 3.46%, helped by a strong session for resource linked names like aluminium and materials. Also, Aristocrat was up 3.02%, giving consumer discretionary some life, while Fisher Paykel Healthcare continued its rally with another 4% move higher.

But the banks aren’t helping the situation. WBC, NAB and ANZ are red, along with ASX Ltd. Net-net the ASX 200 Index was up 0.69% for the trading session with short term market breadth being around 61%, which is a good sign.

ASX 200 Heat Map Shows Miners And Select Growth Stocks Leading

Construction Work Done With Growth Beat Supporting Cyclicals

Construction work done came in much better than expected with a 3.4% value versus a 0.8% forecast. There’s life in the Australian economy, particularly around engineering work, resources linked activity and infrastructure. That’s supportive for miners, contractors, industrials and materials stocks.

Construction Work Jumps 3.4%, Beating Expectations

Inflation Softer On the Surface, Sticky At The Core

Headline CPI eased to 4.2%, a little below the 4.4% forecast and down from 4.6% However, core inflation is still sticky. So overall the data is mixed.

CPI Cools to 4.2%

Australian 10 Year Yield Sitting At 4.86% Support

Currently the Australian 10-year yield is sitting on some support around the 4.86% level. The RSI and Z-Score SMA are trending higher so it looks as though the yield is gearing up to flip the Supertrend and get back over the 50-SMA on the Renko chart. The rally in yields would not help equities in the short term.

Australia 10-Year Yield Eases From Recent Highs

Renko Bulls Knocking On The Door of Trend Change

The ASX 200 Index has touched the 500-SMA for the first time since the 8th of May. It didn’t cross over though. More positive price momentum is needed to carry the Index over. The Supertrend is positive and the Index is above the 50-SMA. The RSI is above 50 but declining and the Z-Score SMA is flat and above 1. Bulls look a bit tired and need to consolidate before breaking through.

ASX 200 Index Rebounds Toward The 500-SMA

Current Trend Direction: Bearish

Bias: Negative

Support Levels: 8,255

Resistance Levels: 8,800, 9,230

Medium Term Path: Getting the ASX 200 Index back above the 500-SMA on the Renko is the first step toward changing its current bearish trend direction and negative bias. There also needs to be some improvement on the weekly technical structure, whereby the Index needs to hold above 8,800. Until then I will hold until that confirmation arrives.