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Good morning Teodor, The Australian market sold off as expected last week, but conditions are now becoming increasingly oversold.
Sentiment has also shifted heavily bearish. When positioning becomes too crowded on one side, markets can often move sharply the other way. For that reason, I’m expecting a more bullish week and a potential relief rally.
Whether that develops into a more important market bottom or simply proves to be an oversold bounce remains to be seen. We need more data before making that call.
One area looking particularly interesting is Materials. The sector has pulled back into key support and is beginning to look constructive again. Within the commodity space, gold, silver, platinum and even copper have moved back into what I consider healthy “Zag zones” following their recent declines. The broader bullish structures remain intact for now.
Information Technology has also fallen roughly 20% over the past few weeks. After such a sharp decline, the sector is becoming increasingly oversold, so a strong counter-trend bounce would not be surprising.
Away from equities, crypto continues to show signs of life. Despite another setback for the CLARITY Act, buyers stepped in rather than allowing prices to collapse. We saw similar behaviour following previous negative regulatory developments, including setbacks around ETFs when BTC was 25k.
I’ve been highlighting the improving setup in crypto over the past month, and the recent price action continues to keep it on the radar. Several altcoins are also beginning to show improving technical structures.
The key question now is whether buyers can turn an oversold rally into something more meaningful.
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