Banks and Miners Drive ASX 200 Rebound

Banks and Miners Carry the ASX 200 Heat

The Index was up over 1.25%. A strong move after weeks of previous declines. The banks looked strong on the day with WBC up 3.48%, ANZ up 3.12%, CBA up 2.96%m and NAB up 2.77%. That’s a financial sector tailwind. Miners layered upon the move as well. FMG was up 3.15%, BHP up 3.05%, RIO up 2.3%, and NEM up 2.06%.

It wasn’t all green. WDS was down 2.66%, RMD down 2.67%, XYZ down 2.10% and WTC down 2.21%. Nonetheless this was broadly bullish intraday breadth. Banks and Miners, the power movers of the ASX 200 Index, showed positive results. That’s a really good sign.

ASX 200 Heat map shows strong gains in Major Banks and Miners

ASX 200 Sector Heat Map

Source: TradingView

Australia Industry Index Stays Deep in Contraction

This doesn’t look good. -24.4 is not growth. On the bright side it is better than the previous reading. Australia’s industrial sector has been stuck below zero for months, which points to weak activity across manufacturing, construction-linked activity, and broad industrial demand. Cyclicals, industrials, small caps, and overall domestic demand can be cracking because weak activity usually means softer earnings momentum and less business confidence. We need to keep an eye on the Australian economy.

Ai Group Industry Index Remains Negative at -24.4

Bar chart of the Ai Group Australian Industry Index

Source: TradingView

ASX 200 Renko Rallies Strongly But Cools Near 8,900 Resistance

Now that’s what I call a breakout. We saw the ASX200 power past the 500-SMA with minimal red bricks and is still holding the positive Supertrend after that powerful move higher. It seems now it is off the highest levels of the move with the RSI crossing under the 70 overbought level and Z-Score SMA turning lower. That is understandable after such a move. The momentum needs to take the Index back above 8,915 to convince me to shift my bias to positive.

ASX 200 15-Brick Renko Showing a Breakout Above 500-SMA

ASX 200 15-Brick Renko

Source: TradingView

The Verdict

Current Trend Direction: Bearish

Bias: Negative

Support Levels: 8,255,

Resistance Levels: 8,915,9230

Medium Term Path: The ASX 200 Index showed its teeth and punched through higher. Finally. But for now it is a corrective rally. For me the level to watch is the 8,915 level for me to change my view on the Index. Hopefully the ASX 200 can stay above the long term 500-SMA on the Renko and consolidate above it to retain the 8,915 level. That may take days or a couple of weeks depending on sentiment. The Bulls need confirmation though. And they need it quick.