ASX 200 Market Outlook: Consumer Stocks Rebound, Coles (COL) Rallies

The ASX 200 advanced on Monday as consumer stocks drove gains and momentum continued to turn higher following a shallow pullback. While volatility is picking up, price action suggests bulls remain in control, with the index increasingly focused on the 8800 region. Strength in staples and discretionary names, led by Coles, is helping offset ongoing fragility in financials, keeping the near-term bias constructive.

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Consumer Strength Lifts the ASX 200 as Momentum Turns Higher

ASX 200 Market Snapshot

9 of the 11 ASX 200 sectors advanced on Monday, led by Consumer Discretionary (XDJ) and Consumer Staples (XSJ), while Utilities (XUJ) led the declines
Materials (XMJ) was technically flat, edging lower by -0.01%
Volatility is rising in the Australian share market, with Monday’s high-to-low range of 0.78% the largest in four sessions
Historical volatility for the ASX 200 shows Tuesday has been the most volatile day of the week over the past three months, with an average range of 80.2 points — above the one-year average of 72 points
Momentum is turning higher after a shallow two-week pullback, with bulls seemingly eyeing a move towards 8800

Chart analysis by Matt Simpson - source: ASX, LSEG

ASX 200 Sector Analysis

The ASX financials sector remains under pressure, with a potential bear flag (or dead cat bounce) forming on the daily chart. Prospects of further Reserve Bank of Australia (RBA) hikes remain on the radar as rising household spending adds to inflation concerns. That said, the key input for any RBA move in February will be the quarterly CPI figures due in two weeks’ time.
Materials (XMJ) remains in a very strong uptrend with no imminent threat of reversal. While prices are edging lower, the retracement is shallow and allowing the trend to breathe, with bulls likely watching closely for the next leg higher.
Consumer stocks continue to outperform, with strong rebounds across Consumer Staples (XSJ) and Consumer Discretionary (XDJ).
Woolworths (WOW) rose for a fourth consecutive session to a six-month high, while Coles (COL) is finally flashing convincing signals that a swing low may be in place.
Wesfarmers (WES), owner of Bunnings, rose 1.44%, with prices now approaching the top of their recent range.

Chart analysis by Matt Simpson - source: ASX, LSEG

Coles (COL) Technical Analysis

I have been waiting some time for Coles to signal that a meaningful swing low is in place. Monday’s upbeat household spending data appears to have helped, with Coles (COL) rising 2.4% in its strongest session in five months. Notably, price closed above the 200-day exponential moving average (EMA) on strong daily volume, signalling clear bullish conviction behind the move. That lifts gains from the swing low to around 5%, suggesting momentum has realigned with the broader uptrend.

Bulls could target the 22.50 area near the 22.64 high. A break above this zone would support bullish continuation in line with the primary uptrend. Pullbacks towards 21 may attract dip buyers, with a bullish bias intact while price holds above the 20.55 low.

Note that Monday’s high stalled at an internal downtrend line, although my bias is for prices to eventually break above this resistance.

Chart analysis by Matt Simpson - source: ASX, LSEG

ASX 200 Technical Analysis

Momentum has turned higher, in line with my near-term bullish outlook. A move towards 8800 appears likely, with the monthly pivot point and November VPOC (volume point of control) in the vicinity. A break above 8820 would bring 8900 and the monthly R2 (8933) into focus for bulls.

Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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