The ASX200 closed up 0.5% on Thursday although it struggled after 3pm giving back almost half of its gains as fairly heavy selling rolled through the SPI futures. Investors still enjoyed over 70% of the main index close up on the day but some weakness in the banks was enough to drag the market back towards 7300, historically the banks are strong from now through until November with ANZ, NAB and Westpac all trading ex-dividend in the first half of next month but after such a stellar advance over the last year it may be too much to ask for standout ongoing strength but don’t be short! The market still feels solid but the stock / sector rotation continues to dominate whether we look day to day, week to week, or even month to month.
The improving market strength & tone was clearly evident on Thursday as 10 stocks rallied by 5% or more while only 1 company retreated by the same degree, we saw some profit taking in the Banking and Energy Sectors but it was noticeably tempered whereas well over 10% of the market popped by more than 4% i.e. when the buy buttons are being pressed there’s little selling resistance around. In our opinion a lack of selling is typically the main ingredient / catalyst for the classic seasonal “Santa Rally”, perhaps its slowly but surely taking shape.
Over the last 4-weeks Australian 3-year bond yields have more than doubled from 0.2% to break well above 0.56% this week, bond traders are clearly voting with their feet / money that the RBA will be forced to hike rates sooner than their flagged 2024 – logic would say its highly likely to be the case but central banks have a habit of being stubborn beasts that act too late and are then forced to aggressively re-align appropriate policy. However it was interesting to see just 1-2 days consolidation by bonds lead to some outperformance by the interest sensitive pockets of the market implying to MM that investors / traders have already positioned themselves for an improving post COVID economy – more on this later.
Overnight US stocks soared to their largest gain in 7-months with a solid start to earnings season and strong economic numbers outweighing inflation fears, the Dow finally closed up 534-points and suddenly all-time highs are only a few good days away. The SPI Futures are calling the ASX200 to open up around 50-points this morning with a $1 rally by BHP Group (BHP) likely to underpin local gains.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
Add To Hit List
