Equity Indices

The ASX200 index trod water last week whereas the action on the sector level was far more interesting with the Financials advancing +2.7% while the Materials index closed down -2.5%. With interest rates expected to be lifted higher this week and China remaining schtum with regard to stimulus, it’s hard to envisage the influential Resources Sector finding any love as we rapidly approach August but as we’ve said a few times recently markets form lows when they look their worst.

• The SPI Futures are pointing to a strong open this morning, up around +0.4%, with Energy & Healthcare Sectors likely to start on the front foot.
• No change, MM continues to believe this year will be dominated by moves on the stock/sector level as opposed to the underlying index i.e. more of the same.

The broad based US S&P500 closed marginally higher last week whereas the tech stocks slipped over -3% from their intra-week high following softer than expected results from Netflix (NFLX US)) and Tesla (TSLA US) i.e. you must deliver if you are priced for growth which was highlighted by TSLA and NFLX who both tumbled well over -10% from their recent highs.  If we are correct the next few weeks should see tech names continue to slip lower however in our opinion the best risk/reward will be delivered by buying this correction.

• We are now looking for an 8-10% pullback by US Tech in line with our recent roadmap – we’ve already pulled back over 3% last week.

US reporting season is now firmly underway with investors awaiting results from heavyweight tech names Alphabet (GOOGL US), Meta Platforms (META US) and Microsoft (MSFT US) in the coming sessions.

Interestingly the Japanese Nikkei while forming a very similar pattern to the US Indices has actually been one step ahead from both a time and price perspective,  hence it may also become a great leading indicator on the way back up if we are correct and equities are carving out a buying opportunity i.e. one to watch.

• We believe the risk/reward will look good toward the Nikkei ~2-3% lower.