ASX slides 3%, selling broad based
WHAT MATTERED TODAY
The market was hit hard today coming off the back of a large sell-off overseas, the ASX 200 more or less mirroring the fall on the S&P 500 despite our market failing to enjoy its recent upside. Tech in the firing line locally down 5.59% as a sector however the sell-off was broad based, more than 10% of the market down by more than 5% while just 6 stocks finished the session higher. Normally consumer staples and healthcare are places to hide on a day like this however given their reasonable run of late, they were used as funding vehicles as investors cashed up a tough.
Overall, the ASX 200 closed down -187pts / 3.06% to 5925 today. US Futures are lower, with Dow Futures off -37pts/0.13%.
ASX 200 Chart
ASX 200 Chart
CATHCING MY EYE
US TECH: Obviously hit hard overnight as a portion of the momentum trade unwound. To give some context here, below is a snippet of my Bloomberg screen this morning from the section that looks at tech companies that are top of our radar. Apple down 8% is not a normal thing, however, to put the move in context, we bought the stock in the middle of last year for US$48, and overnight it closed at $120 after shedding $10. Apple trades on 31x earnings and they’re projected to grow those earnings by 24% in FY21, to give some context on the scale of that growth, that’s an increase of $US7.9b, or more than the total profit that CBA will generate in the coming 12 months. MM’s point here is that the talk of a tech bubble that we’re hearing a lot of today is premature as the case with Apple shows, it’s simply a washout when everybody is long / complacent, and when momentum starts, the cascade happens.
As we suggested this morning, at this stage we see nothing more sinister than a consolidation similar to July’s, there was no specific news crossing the screens last night but the combination of high valuations and momentum traders all positioned the same way leaves stocks / sectors vulnerable to sharp pullbacks i.e. the BNPL stocks locally.
MM remains bullish US stocks medium-term.
What we walked into this morning…
Source: Bloomberg
Apple AAPL US Chart
Sectors this week
Source: Bloomberg
Stocks this week
Source: Bloomberg
OUR CALLS
No changes today
Have a great weekend all
James and the Market Matters team
Disclosure
Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.
Disclaimer
All figures contained from sources believed to be accurate. All prices stated are based on the last close price at the time of writing unless otherwise noted. Market Matters does not make any representation of warranty as to the accuracy of the figures or prices and disclaims any liability resulting from any inaccuracy.
Reports and other documents published on this website and email (‘Reports’) are authored by Market Matters and the reports represent the views of Market Matters. The Market Matters Report is based on technical analysis of companies, commodities and the market in general. Technical analysis focuses on interpreting charts and other data to determine what the market sentiment about a particular financial product is, or will be. Unlike fundamental analysis, it does not involve a detailed review of the company’s financial position.
The Reports contain general, as opposed to personal, advice. That means they are prepared for multiple distributions without consideration of your investment objectives, financial situation and needs (‘Personal Circumstances’). Accordingly, any advice given is not a recommendation that a particular course of action is suitable for you and the advice is therefore not to be acted on as investment advice. You must assess whether or not any advice is appropriate for your Personal Circumstances before making any investment decisions. You can either make this assessment yourself, or if you require a personal recommendation, you can seek the assistance of a financial advisor. Market Matters or its author(s) accepts no responsibility for any losses or damages resulting from decisions made from or because of information within this publication. Investing and trading in financial products are always risky, so you should do your own research before buying or selling a financial product.
The Reports are published by Market Matters in good faith based on the facts known to it at the time of their preparation and do not purport to contain all relevant information with respect to the financial products to which they relate. Although the Reports are based on information obtained from sources believed to be reliable, Market Matters does not make any representation or warranty that they are accurate, complete or up to date and Market Matters accepts no obligation to correct or update the information or opinions in the Reports. Market Matters may publish content sourced from external content providers.
If you rely on a Report, you do so at your own risk. Past performance is not an indication of future performance. Any projections are estimates only and may not be realised in the future. Except to the extent that liability under any law cannot be excluded, Market Matters disclaims liability for all loss or damage arising as a result of any opinion, advice, recommendation, representation or information expressly or impliedly published in or in relation to this report notwithstanding any error or omission including negligence.
