Australian Market Suffers Worst Week in Six Months Amid Oil Price Surge

The Australian stock market experienced its worst week in six months with a 2.9% decline, as surging oil prices, rising global bond yields, and renewed bets on rate hikes from the RBA and Fed led to a broad risk-off move.

With sector correlations surging and momentum stretched to the downside, traders now face a balance between deeper downside risks and the potential for a near-term rebound. The ASX 200 is now down 1.6% year-to-date, which could be a sign of a grinding top.

The bearish RSI divergence on the monthly chart heading into the March high adds weight to the case for a potential top. Sector correlations have been slammed into overdrive, with most sectors having 10- and 20-day correlations above 0.8.