Market pullback as leads shift

THE pullback I spoke of last week has come to pass as the market consolidates in preparation to break the January highs.

The SPI Futures continue to move further above the ASX 200 which is a very positive indicator for the market.

It is a long time since the futures have looked so positive.

As I have discussed several times, there is a new guard taking over the lead in the market.

The stand-bys of the past which have propelled the market have finally run out of steam and are now in very clear downtrends.

The Commonwealth Bank (CBA) which has been trending down since early last year finally closed below the strong support at $70 on Wednesday.

After a break of a significant support like this it will soon reverse to retest what will now become resistance.

Once it confirms the break, it then has targets around $55 then $45.

At the moment ANZ is headed to its next support at $22 and National Bank (NAB) is headed for $24.

Westpac (WBC) looks set to break $28 and when it does its next support will be $20.

The other major player has been Telstra (TLS), and the sustained downtrend which has been in place since early 2015 will likely find some support around $2.50 from which we will likely see a bounce back to maybe $3.

AMP is also looking very sick and looks set to break all past support levels.

The major stocks which appear to be taking the lead now and for the next cycle in the market include the two large miners BHP and Rio.

Rio is now set to move up to retest its all-time high and BHP is now headed for $40, and if it breaks above that then its next resistance will also be its all-time high.

Insurance Australia (IAG) and Qantas (QAN) have both broken above their respective all-time highs this year and look set to continue higher.

CSL has moved up steadily from $60 to $180 over the past five years and still looks strong as no pullback over the past couple of years has overlapped the previous spike high, which is usually the first sign of weakness in any uptrend.

It is, however, close to $200 which will be a strong psychological resistance, so we may see it at least trade below this level for some time before we see if it has the strength to continue.

There are also many mid-cap resource stocks performing very well and will likely be up there with the front runners as the uptrend re-establishes itself.

Bass Metals (BSM), our remaining active stock touched 3.5c during the week and as of Wednesday was pulling back slowly in preparation to break above 3.5c and head towards its next target around 5c, then likely on to the 8c resistance level.

Some of the speccies I bailed out of a while back are starting to stir again, so I will revisit a couple of them in next week’s column.

Last week I talked about halfway crosses in a chart, which by the way don’t happen very often.

But, in a recent market scan I came across another one at 3.5c in KGL Resources (KGL) on May 8.