TECHNICALS – FINANCIALS VS RESOURCES

The financials sector of the Australian market has emerged as a positive sector technical theme. It is a positive momentum indicator for the financials /bank sector outlook that over last two trading days, three of the four major banks have generated new technical buy signals. Given this has occurred in a cluster/rapid succession is a positive technical indicator. More broadly there are also a significant number of non-bank financials that are rated as technical buys, including a number of A-REITS. Combined the heavy concentration of financials buy signals, especially three of the four major banks, is positive for the sector outlook from a technical perspective. By way of contrast, there is no sign of a turnaround / base forming emerging in the major resources sector of the market. It is a lower risk technical strategy to buy on the upswing, after the trend has turned positive, rather than buying on a pullback (and against the trend).