ASX 200 Eyes a Swing Low, Though Financials and Consumers Remain Fragile

The ASX 200 is attempting to stabilise after falling 2.6% from its record high, with oversold momentum and signs of seller absorption putting a potential swing low on the radar. Yet weakness across several highly correlated sectors, particularly financials and consumer discretionary, suggests downside risks have not disappeared. With options expiry also approaching, the 9,000–9,100 region could prove pivotal for the next move.

 

 

ASX 200 Selloff Loses Momentum as Sector Risks Remain

ASX 200 Correlations

• Financials remain a strong near-term driver, with their 10-day correlation to the ASX 200 at 0.81, although the weaker 20-day reading of 0.36 shows this relationship has been volatile.
• Real estate and telecoms are tightly aligned with the index, with 10-day correlations of 0.97 and 0.86 respectively. Moves in these sectors could provide useful confirmation of broader ASX 200 direction.
• Materials remain consistently supportive, holding positive correlations across the 10-, 20- and 60-day windows. This makes the sector a useful cross-check for whether an ASX move has broader participation.
• Sector divergence is elevated beneath the surface. Info tech (-0.79) and utilities (-0.89) are strongly inversely correlated over 10 days, while industrials (-0.43) and healthcare (-0.51) are also negative. This points to a rotation-heavy market rather than a uniform index move.

Source: ASX, LSEG

 

 

ASX Sectors Warn the Selloff May Not Quite Be Over

Looking through the sectors with the strongest positive correlations to the ASX suggests the worst of the selloff may not be over. Financials (XFJ) reached a six-month low, with its small lower wick suggesting bears remain in control for now. Consumer discretionary (XDJ) is testing support, and a successful hold could provide a pillar of support for the ASX. Real estate (XRE) formed an inverted pinbar above the July low, hinting that bearish momentum may be fading. Telecoms (XTF) is yet to form a convincing swing low and is the only one of the four sectors discussed that does not have an oversold RSI (2).

Ultimately, these sectors need to at least stop falling, and preferably provide bullish clues, for confidence to grow that the ASX has formed a swing low. Until then, I remain on guard for another spike lower before a relief bounce begins.

Source: ASX, TradingView

 

 

ASX 200 Technical Analysis

The ASX has fallen -2.6% from its record high, most of which occurred over the last four days. That said, bearish momentum all but died during Tuesday’s narrow-ranged day, with a small doji forming around the 20-day EMA. With the daily RSI (2) oversold for a third day and at its most extreme since late April, bulls may now be seeking evidence of a swing low.

However, such narrow-ranged candles are easily taken out in both directions before the real move occurs. And with the April low not too far away, I would not be too surprised to see an initial attempt lower before a bounce materialises.

 

 

 

ASX 200 Options Point to 9,100 as Expiry Magnet

The ASX 200 options profile points to 9,100 as the main near-term magnet heading into Thursday’s expiry. Open interest is reasonably balanced there across this week’s and next week’s options, which could keep prices anchored around 9,100 and trade choppy.

The 9,000 level is the more important support zone, with sizeable call and put interest around this psychological level. Below there, 8,950 stands out as a stronger downside floor should selling accelerate.

Above the market, 9,150 and particularly 9,200 are the main hurdles. Call open interest is heavily skewed at 9,200 for Thursday’s expiry, making it the clearest gamma ceiling, while next week’s positioning reinforces 9,150–9,200 as resistance.

With SPI futures hovering around 9,000 after pulling back from their record high, the options profile favours consolidation unless the ASX 200 can gain acceptance above 9,100 or break decisively below 9,000.

Source: ASX, TradingView

 

 

 

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge