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.

View related analysis:

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

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.