The wheels are coming off the ASX 200 as its bearish move gathers pace. Regular readers will know I’ve held a negative view on the Australian share market in recent weeks, driven by price action clues among key ASX sectors.
View related analysis:
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- ASX 200 Morning Outlook: Real Estate Reeling Post RBA (GMG, GPT, SCG)
- ASX 200 Evening Wrap: ANZ Drags Financials Lower in Broad Market Selloff
- ASX 200 Evening Wrap: CBA Drags Index Lower as Financials Buckle
Chart analysis by Matt Simpson - data source: ASX, LSEG
Information Technology (XIJ) has been trending lower since its September peak after forming a double top above 3,000. Frothy tech valuations have become a growing concern on Wall Street, with heavy Nasdaq selling dragging the ASX tech sector with it. Consumer Discretionary (XDJ) has also been sliding for several weeks, with downside momentum accelerating through late October after topping out in August. This is a classic risk-off rotation as investors move away from cyclicals and into defensives such as Utilities. But even Utilities (XUJ) have turned lower following Wall Street’s selloff and rising risks that the RBA may hike rates next year.
In recent weeks, markets have had to absorb a hawkish RBA hold, rising inflation, a record jump in home loans, and now lower unemployment alongside firm job creation. These are hallmarks of an economy that’s heating up — and the prospect of an RBA hike wasn’t even on the ASX’s radar until this week.
If Australian economic data continues to heat up and raise expectations of hawkish talk from the RBA, it could weigh further on sectors such as Real Estate (XRE).
ASX 200 Real Estate (XEJ) Under Pressure as Goodman Group (GMG) Leads Megacaps Lower
The ASX 200 Real Estate sector (XEJ) peaked in August at a record high and has fallen roughly 10% over the past 14 days since its October high. A bear flag formed last week, and bearish momentum has clearly re-asserted itself. The XEJ/ASX ratio also shows the sector underperforming the broader market, despite the wider index facing selling pressure of its own. Thursday delivered the sector’s worst session in seven months, sliding -2.7%.
Chart analysis by Matt Simpson - data source: TradingView, ASX
Goodman Group (GMG)
The sector heavyweight is under strain, with Goodman Group (GMG) dropping to a seven-month low. GMG has now entered a technical bear market after falling more than 20% from its August high. Prices are trying to hold above a weekly VPOC at 29.29, but with no signs of a base forming, further downside towards the 28.69 VPOC remains possible. A break under 27 would expose the next VPOC at 26.07.
Scentre Group (SCG)
SCG is holding up relatively well despite the broader sector selloff. While an extended bearish engulfing candle formed on Thursday, prices are attempting to hold above the September low. With the $4 handle and monthly S1 pivot at 3.95 nearby, this may be one for bulls to consider if sentiment turns. For now, my bias remains neutral.
GPT Group (GPT)
GPT is showing a similar pattern to SCG: the stock is under pressure due to the risk-off tone, but it is holding up better than both the ASX 200 and the XRE sector. GPT is outperforming SCG, trading around its 50-day EMA and well above its September low. If sentiment improves, this is another stock bulls may look to.
REA Group (REA) Caught Between Technology and Real Estate Selloff
While REA sits within the ASX Communication Services Index (XTJ), its revenue is heavily tied to property activity. If rising interest rates slow housing turnover, earnings expectations for REA typically fall — which explains why the stock often trades more like a real-estate proxy than a pure media company.
This is reflected in its current behaviour: REA’s 20-day correlation with the XRE real estate sector sits at a strong 0.92 and is still rising. The price action also suggests REA is leading the XRE sector (purple) lower, and its relationship with XRE is notably stronger than with its official sector, XTJ (green).
The weekly chart shows a lower high forming in August, beneath the record peak set in February. The current decline may be part of a simple ABC pullback within the longer-term uptrend, or the early stages of a 5-wave bearish sequence.
The 100% projection of wave A from wave B falls around 190 — a level REA needs to hold to maintain the ABC correction scenario. A decisive break below 190 would open the door to a deeper selloff. The 50% retracement aligns with the 180 handle, while the 138.2% extension and 61.8% retracement cluster around 160, creating a notable downside zone for bears if 190 gives way.
Chart analysis by Matt Simpson - data source: TradingView, ASX
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-- Written by Matt Simpson
Follow Matt on Twitter @cLeverEdge
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