ASX 200 Index Forecast: Miners and Banks Drag As Healthcare Bounce Fails To Flip Bearish Trend

Heat Map Shows Heavyweight Damage

During this trading session the big weights are doing the damage. BHP (-2.48%), Rio Tinto (-1.86%), Fortescue (-2.33%), CBA (-1.73%), NAB (-1.13%), ANZ (-1.04%) and WBC (-1.22%) are all down by over 1%.

On the other hand CSL is up by 5.75% and ResMed is also up by 4.30%, helped by a defensive rotation into healthcare, with CSL supported by insider buying after its really bad sell off. Healthcare had its best session in years, led by CSL, Cochlear, ResMed and Pro Medicus.

Materials are bleeding though. Evolution Mining (-3.06%), Pilbara Minerals (-3.75%) and AAI (-4.00%) are all down by over 3%. These stocks reflect pressure across gold, lithium base metals. Lithium stocks weakened as Chinese lithium carbonate futures had pulled back severely, while gold names were hit by weaker gold prices and Resolute’s production guidance cut.

Not a good way to end the week at all.

Miners And Banks Weigh On ASX 200 Index Despite Healthcare Strength

Yields Add Another Headwind

So after basing for a couple weeks, yields have pushed higher. The Renko bricks for the Australian 10-year has crossed above the 21-EMA and is approaching the negative Supertrend Line as well as the 50-SMA. We could have a short term move higher for yields as the RSI and Z-Score SMA are displaying positive momentum. The RSI crossed above 50 and is pointing higher while the Z-Score SMA is still trending higher. That bullish divergence is coming into play. If the bricks continue to move higher we may get a retest of the 5.15%-5.175% resistance zone.

Australian 10-Year Yield Rebounds Toward 5%

ASX 200 Index Renko Turns Lower

The ASX 200 Index failed to hold above the long term 500-SMA for the second time within a month. Renko bricks also broke back below the 21-EMA as well as 50-SMA. Indeed, there was even a negative trend flip on the Supertrend. Momentum is also negative, with the RSI hovering around 36 and pointing lower. The Z-Score SMA is also trending lower with room to move much lower. It’s looking like a retest of the double bottom pattern in mid May.

ASX 200 Index Breaks Back Below MAs on 20-Brick Renko

Current Trend Direction: Bearish

Bias: Negative

Support Levels: 8,255

Resistance Levels: 8,800, 9,230

Medium Term Path: This is precisely why you wait for confirmation in the medium term. The ASX 200 Index made an about face, turning back below the 500-SMA on the Renko. Yields are looking like it’s heading back above 5% and the ASX 200 Index seems to be heading back towards the 8,480 to 8,495 short term support zone. If there’s a break below that we could even see a retest of the 8,255 level. The momentum seems to be there for that move so be on the look out for it.