The ASX200 again succumbed to selling into early morning strength as we followed US S&P500 futures lower throughout the day, considering their 0.4% decline by 4pm AEST a small 0.1% dip by the local market was fairly encouraging, especially as iron ore plunged almost 8% at one stage weighing on both sentiment and related stocks. Fortunately from an index perspective the influential banks were strong and 40% of the market still managed to close in positive territory. The markets look and feel remains the same which is no surprise considering the ASX remains unchanged in over 3-months i.e. we’re resilient into weakness but have no “mojo” when the news should theoretically provide a healthy tailwind.
While our stance has not altered for the run in to Christmas a couple of points need mentioning / reiterating:
- MM remains bullish the ASX200 into 2022 but we anticipate slowly de-risking if / when we see the market reach our targeted 7700-7800 target area.
- The US S&P500 looks set to correct further its strong 10% rally of the last 4-weeks, our ideal target is around the 4600 area, after the overnight dip less than 1% lower.
- Hence we can see a little more treading water by the ASX before the sellers take their traditional / seasonal holiday allowing stocks to enjoy a festive rally.
Overnight US stocks fell by the most in a month after receiving a double whammy on the interest rate front:
- Long term yields bounced strongly, following a weak auction, which lead to weakness in the tech and growth stocks.
- Also the US CPI showed America is experiencing the fastest lift in inflation for more than a decade which sent shorter dated bond yields sharply higher as investors brought forward the anticipated timeframe for rate hikes.
The risks are increasing that the Fed will be more aggressive than initially thought with their planned stimulus tapering which has understandably created some wobbles in stocks but the 0.8% dip in the S&P500 and likely 0.1% early fall by the ASX200 both feel fairly muted considering the news.
MM remains bullish the ASX targeting fresh highs into Christmas
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