ASX 200 Outlook: ASX 200 Seeks Bounce Despite Rising Bearish Open Interest

The ASX 200 cash index closed lower for a third consecutive session on Tuesday, although volatility continued to contract and a bullish hammer formed near support. While SPI 200 futures are attempting to stabilise above support levels ahead of today’s open, rising open interest during the recent decline suggests bears still retain influence unless bulls can reclaim higher levels.

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ASX 200 Bulls Attempt To Stabilise Above Key Support

ASX 200 Market Snapshot

• The ASX 200 closed lower for a third consecutive day on Tuesday, though with volatility waning and a small bullish hammer forming, perhaps we’re close to a bounce
• Nine of the 11 sectors declined, led by technology (-3.4%) and consumer staples (-1.8%), while materials (+2.4%) and utilities (+2.1%) advanced
• Materials is once again the outperformer, though financials remain under pressure, which is capping upside potential for the broader ASX 200 (these two sectors account for more than 50% of the index weighting)
• Wednesday has averaged the highest daily range of the week over the past three months (119 points) and one year (82 points)
• With SPI 200 futures holding above support, perhaps bulls can regain control after the ASX 200 cash market gapped lower today

Source: ASX, LSEG

ASX 200 Correlations Highlight Divergence Between Materials and Financials

Materials continues to provide key support for the ASX 200, maintaining a strong positive correlation with the index across multiple timeframes. Financials and industrials also remain closely tied to broader index performance, although the sharp inverse 3-day correlation with financials suggests short-term divergence. Energy remains negatively correlated with the ASX 200, while defensive sectors such as utilities and consumer staples show weaker relationships overall.

Source: ASX, LSEG

ASX 200 Technical Analysis

A bullish hammer formed with a false break of the April low, and closed above an 8650 options support cluster and 50% retracement level. Note the major floor at 8600 which denotes heavy calls and likely support. SO while SPI 200 futures are a touch lower, the preference is to seek dips today.

However, open interest on the SPI 200 shows rising volumes during the 3-day decline – meaning bears have dominated volume. That could cap upside potential today unless ASX bulls are gifted with a reasonably bullish catalyst. For now, they will need to suffice with a false break of support with a bullish hammer.

8700 is a key battleground today, with 8750 likely capping as resistance due to heavy put activity. An equivalent bounce on the ASX to 8750 is also roughly in line with the monthly pivot point on SPI 200 futures at 8754.

• Above 8750 brings 8800 into focus.

• Below 8650 exposes the 8600 floor.

Source: ASX, TradingView

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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