The ASX 200 broke down and through the bottom of the 2015 trading range yesterday under the heavy weight of Australian banking stocks being sold off as traders reappraise the outlook for the sector. The CBA fell more than 5% taking the index down 2.3% on the day.
Overnight weakness in the US has weighed on futures trade with the June SPI 200 contract off another 22 points to 5632, setting up another tough day for the bulls.
What appears to be a fundamental reappraisal of the outlook and dividend paying potential for Australia’s banking sector is occurring at the same time that global bonds markets are sinking (in price as yields rise) and the technical outlook for the ASX 200 (AXJO in the chart below) is at risk of deteriorating materially.
With a close of 5,692 last night the ASX200 is just 30 points above the level it couldn’t beat in 2014, before this year’s rally towards 6000 began and failed.
Now, if the market falls through 5,650/60, the next target is 5,500 with some technicians I have spoken too looking for a fall all the way to 5,300.
Here’s the chart: