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ASX 200 Forecast: Weak Renko Structure and Rising Yields Keep 8,255 Support in Focus
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Key Points:
- ASX 200 breadth improved, but the recovery still looks fragile, with 44% of stocks above their 20-day MA. A move above 50% would give the rally more credence, but for now this still looks like a countertrend bounce.
- Higher Australian 10-year yields remain a headwind, with yields holding near 5.10% and still above the 50-SMA and 500-SMA on the Renko.
- The ASX 200 Renko is bearish, with price bouncing around but under the 50-SMA and 500-SMA. A break above those levels would improve the setup.
ASX 200 Heat Map Shows Defensive Rebound as Woolworths, CAR and SEEK Lead
The ASX 200 Index got some respite with the Index’s members broadly green throughout. The standouts are Woolworths (3.73%), helped by a JP Morgan upgrade to Overweight and a $37 price target. CAR Group was also up 3.7% and so was SEEK (+3.4%) as communication services rallied. Additionally, SGH (+3.58%) helped the tape.
But all wasn’t up on the day. Lynas showed some red, down -4.28%, with rare earths and parts of materials still under pressure from profit taking and weaker materials sentiment.
The ASX 200 Index was up over 1% for the trading session but still down 0.50% over the last 5 trading days. There’s been improvement in market breadth as now 44% are above their 20-day MA. Over 50% will really show some positive market breadth and hopefully signal an end to this pullback.
ASX 200 Heat Map Shows Broad Green Across Banks, Healthcare, Retail and Communications, with Woolworths, CAR Group, SEEK and SGH
Westpac Consumer Confidence Rebounds as ASX 200 Gets a Small Sentiment Lift
The Westpac Consumer Confidence bounced 3.5% in May after a nasty 12.5% drop. While it’s good it’s still not that good. Consumers are still dealing with higher rates, expensive mortgages, and sticky cost of living pressure. One good data point isn’t a change in trend. Still the ASX 200 got a bit of a bid from it. It still looks like a countertrend rally.
Westpac Consumer Confidence Rose 3.5% in May After April’s 12.5% Decline
Australia 10-Year Yield Holds Above 5% as ASX 200 Faces Rate Pressure
Australia’s 10 year yield is sitting around 5.10%, attempting to break out of the 5.175% previous highs from my observations on the Renko chart. The Z-Score SMA is trending lower, which is an indication of slowing momentum, but the RSI is above 50 and moving higher. So basically things are mixed but leaning towards the upside as seen by the positive Supertrend. Also the yield is above its 50-SMA and 500-SMA. With these elevated yields it’s hard to see equities perform under these conditions.
0.025-Brick Renko Chart Shows Australia’s 10-Year Yield Holding Near 5.10%, Above the 50-SMA, with RSI Still Positive
ASX 200 Renko Chart Shows Fragile Bounce Below 50-SMA and 500-SMA
The countertrend move in the ASX 200 Index continues with a brief rally towards the 50-SMA on the Renko chart. There’s been a positive flip on the Supertrend but it looks like the ASX 200 can’t go above the 50-SMA. It’s now acting as resistance. The Z-Score SMA is still trending higher so maybe there’s just enough momentum to take the ASX 200 Index back above. There’s also some red bricks being shown. The overall trend is downward.
20-Brick ASX 200 Renko Chart Shows Price Struggling Below the 50-SMA and 500-SMA As RSI Remains Under 50
Support Levels: 8,255
Resistance Levels: 8,880, 9,230
Medium Term Path: Improving market breadth is a glimmer of hope for the Index but it still needs to get above critical levels on the Renko for me to assign a better trend direction and bias. Thus, keep an eye on short term market breadth as well as the 50-SMA and 500-SMA on the Renko as those tools for me are the deciders.
About the Author
Cedric Thompsonauthor
Cedric Thompson, CMT, CFA, is an investment strategist with experience in asset management, corporate strategy, and multi-asset investing.
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