The local share market may have snapped its five-week winning streak, but it remains in an uptrend, one expert says.
On Friday afternoon the ASX200 was headed for a 1.3 per cent loss for the week, after gaining 7.1 per cent in December - its best month since November 2020.
"I've kind of been expecting this pullback, which probably should be considered a healthy pullback given that we are obviously reaching multi-year resistance levels," Zoran Kresovic, a market analyst with Australian derivatives platform Eightcap, told AAP.
On Tuesday, the ASX200 came within one-tenth of a point of its August 13, 2021 all-time intraday high of 7,632.8, but then dropped 1.3 per cent the next day.
"It's only normal to expect, when a market comes to critical resistance levels, to actually pull back," Mr Kresovic said, adding that profit-taking or traders shorting the market could cause such a short-term drop.
Such a backwards move can be considered healthy because it might attract new buyers into the market, he added.
"I wouldn't be too concerned at the moment unless we see a fundamental change."
Mr Kresovic believes the ASX200 might fall further, perhaps to around 7,400 - another 94 points, or 1.2 per cent, from where it was Friday afternoon - but then re-test its all-time high.
"We're still in an uptrend," he said.
"We're still looking very bullish."
The material sector is performing quite well, with iron ore - Australia's biggest export - trading at an 18-month high of $US145 ($A216) a tonne, Mr Kresovic noted.
The price of the steelmaking commodity has risen amid expectations China will extend recent stimulus measures.
If the ASX200 does manage to break through around the 7,650 level, the ASX could see an influx of new money entering the market because Australia's benchmark index is lagging some of its global peers such as the S&P500 and Dow Jones Industrial Average, Mr Kresovic said.
He attributed December's global rally mostly to signs from the US Federal Reserve that interest rates have finally peaked and could be rapidly cut this year.
The market is expecting five to seven US interest rate cuts in 2024, beginning in March, which would be a powerful tailwind for risk assets such as equities.
