This weeks summed up perfectly both June & July for the ASX200, we kicked-off on Monday with one of the worst days in months leading to a test of 7200 on Tuesday morning, but by the close on Thursday these losses were well and truly in the rear view mirror as local stocks closed within only 0.3% of their all-time high, buy the dips is clearly still the winning formula. Equities continue to look through the deteriorating COVID news, if anything the more worrying the data that poor Gladys delivers at 11am the stronger stocks rally. Logic is starting to paint a very worrying picture for Sydney with August already feeling like a lost cause to the Delta Strain, markets appear to be focusing on the next 6-12 months’ time not today which is how they usually function. Two thoughts:
- NSW may be in a lockdown for months but if that’s the case the Federal & State governments will simply be forced to throw more money at the issue i.e. it worked last time, why not again!
- Scott Morrison in particular is betting that as we hit 1-million vaccinations a week the virus will be under control by Q4 but I caution as countries with largely vaccinated populations are still struggling to re-open smoothly.
At this stage stocks are bullish and fighting the trend remains the best path to poor returns but history tells us things do change hence our mantra is largely unchanged – “stay bullish stocks but maintain a degree of flexibility to enjoy, as opposed to panic, when the ASX does again pullback over 5%. In the meantime focus ones attention on the vagaries of the markets current stock and sector rotation.
We discussed the technical picture for the ASX200 yesterday and almost on cue the local index made an assault on fresh all-time highs, the question is now what if we see a clear breakout above Junes 7406 high :
- Firstly, stay long and enjoy the ride unless we get failure but where would that be?
- Technically a failure signal would be generated for MM by a break back below 7375 i.e. pretty good risk / reward to stay long.
US stocks were edged higher overnight although there tech sector did noticeably outperform rallying +0.7% as bond yields edged lower. Unfortunately the ASX being more skewed towards the resources and banks is set to open down ~0.2% this morning with BHP Group (BHP) slipping 20c in the US.
MM remains a keen buyer of stocks into pullbacks
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