The ASX200 enjoyed a solid Wednesday with the index closing up +0.8%, the banks and resources led the gains as the “reflation trade” enjoyed a day back in the sun. I’m trying extremely hard not to make the reports monotonous as we continue to witness an ongoing “tug-of-war” between the value and growth stocks, which has been lasting for many weeks as economic optimism rises and falls with as much regulatory as the sun in the morning, however our underlying view continues to slowly take shape:
- MM remains bullish stocks into Christmas & beyond but a dip under 7000 over the coming months would not surprise i.e. a similar retracement as we saw between June & September 2020 which provided an excellent buying opportunity.
- The tech / healthcare stocks have led the way since May as bond yields have fallen but MM believes the momentum is slowly moving back towards the banks and resources.
For the technical analysts among our subscribers the local market is forming a classic “Bullish Flag Pattern” which can be summarised in 2 ways:
- The ASX200 is consolidating its 489-point advance from 6917 in May, assuming it can hold the 7160 level it should eventually set off on another rally towards 7500, and perhaps significantly higher.
- However if we do see a clear break of 7160 MM would expect stocks to endure a sharp fall under the psychological 7000 area.
That’s the theory which actually does unfold more often than not however either way the most important fact is MM believes the post GFC bull market is alive and well. Hence we remain bullish equities looking for optimum opportunities to increase our exposure to stocks – the resources are our main focus at this stage.
US stocks were again strong overnight as the coronavirus took a back stage to a strong procession of corporate profits, exactly what markets should be all about! Noticeably more than 85% of companies that have reported results so far have beaten analyst expectations suggesting this season will be another hurdle the bull market clears with ease. The ASX200 is poised to open up around 1% this morning aided by a surging Energy Sector in the US i.e. BHP Group (BHP) is poised to open up ~50c this morning while Uranium & Lithium stocks overseas also popped.
MM remains a keen buyer of stocks into pullbacks
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