ASX 200 Index: 38.2% Fibonacci under pressure as optimism flows

Australian shares have started on the front foot this week, with the ASX 200 Index trading 1% in the open. At the time of writing, ASX 200 is trading at 5,458 having travelled from a low of 5,404 to a high of 5,477 so far. The index is pressuring, once again, a key resistance of 38.2%.

Investors are expecting that the easing of COVID-19 restrictions will translate into more positive data following a  resurgence in consumer demand which will result in a gradual economic recovery. However, when we look around the markets, we can see higher levels in gold and there is an underbelly of risk-off in the driver's seat.

While geopolitics is just far too unpredictable, they remain front and centre all the while China's trade war with not just the US but also Australia go unresolved. A resurgence in tensions should keep discretionary capital on the sidelines for a while longer and stocks will struggle to gain traction in any convincing manner in such an environment.

It certainly doesn't help when China doesn't return Trade Minister Simon Birmingham calls to resolve the disputes. Australia's Trade Minister Simon Birmingham has been trying to speak with his counterpart since China threatened to impose an 80 per cent import tariff on Australian barley. China will make its final decision on the tariff on Tuesday. 

Gold and mining stocks outperforming

As for performers, we are seeing some weakness in the banks today,  Westpac (-0.5pc), NAB (-0.4pc), Commonwealth Bank (-0.3pc) and ANZ (-0.2pc). However, these have been more than offset by the iron ore mining giants BHP (+2.8pc), Rio Tinto (+2.4pc) and Fortescue Metals (+3.4pc), which are providing a major boost to the market. Gold was on the rise today to the highest value in seven years. This fuelled the bid in gold stocks, including Saracen Mineral (+8pc), St Barbara (+7.2pc) and Newcrest Mining (+5.7pc). Some of the worst performers were Macquarie Group (-2.5pc), Unibail Rodamco Westfield (-1.6pc) and United Malt Group (-1.5pc).

ASX 200 Index levels

The 38.2% Fibonacci level (5470) holds, so far, but is being tested time and time again. The index has been trading between there and the 23.6% Fibo since the end of March. On a break higher will extend towards a 50% mean reversion at 5794 ahead of a 61.8% golden ration at 6127. Meanwhile, the bears will be looking for an extension below the COVID-19 lows of 4402.