Market Matters Afternoon Report Monday 11th July 2016

Afternoon Report 11/07/2016

Market Matters Afternoon Report Monday 11th July 2016

Good Afternoon everyone

Market Data

What Mattered Today

Our weekend report on Sunday started with…. ‘Hold on tight, we believe there is a very high chance that equities explode to the upside this week!’ The view was based on a couple of things, largely around the likely direction of the US market, as determined by the S&P 500. On Friday, US non-farm payrolls came in better than expected (287k v 180k expected) however the composition was weak and prior months were revised lower. It’s also clear the US Federal Reserve is conscious of the macro uncertainty coming from Europe following the UK referendum.

In short, the U.S economy is strong, but not strong enough in the context of current global uncertainty to see a hike in US interest rates. That creates a very supportive environment for stocks and we saw the S&P 500 close Friday at 2129 – just 6 points shy of the all-time high of 2135. This level is likely to be tested tonight with the S&P Futures currently up +8pts.

When major markets break out to new highs, money is often forced to participate. We know cash levels are high, we know alternative investments like bonds look unappealing, and if we see what’s often described as the global benchmark trade into blue sky territory, then there’s a very good chance the Aussie market will rally.

Of course, we also had confirmation that the Libs will win the election while TurnBULL will retain the top job. According to ABC predictions, it also now seems likely that they will do so with a majority, scraping through with 76 seats. This is good for the market generally, however, more specifically for the banks given it reduces the chance of a royal commission into the sector…

More broadly, the market was up early and stayed up for the day. A range of +/-91pts. 5246 low, 5337 high and a close at 5337; up +106pts or +2.04%. Importantly, the market closed on its highs which bodes well for the remainder of the week.

Obviously, we need to be conscious of ‘where to from here’ given today’s strong move. One of the most pleasing aspects of today’s trade was strong buying in the banks with the BIG 4 accounting for +33 index points on the upside. From an index level, 5500 now becomes our first upside target.

Sectors Today

Source; Bloomberg

ASX 200 Movers

What Matters Overseas

The US market is key as we mentioned above. A break this evening of 2135 on the S&P 500 is clearly bullish. We appreciate that price action can be a mystery for some, however thinking about the psychology of moves can be rewarding . A break of a previous high can often be a trigger point for buyers to step in, soothing their lingering old ‘Fear Of Missing Out (FOMO).

As we’ve suggested numerous times, markets often move in the direction of most pain, and when cash levels are high, bearishness is reasonably elevated courtesy of high valuations and a messy macro environment, then the most pain will be inflicted by the market going higher.

….FUTURES suggesting a positive start overseas

Regards,
The Market Matters Team
Level 12 28-34 O'Connell St
Sydney, NSW 2000

All figures contained from sources believed to be accurate. Market Matters does not make any representation of warranty as to the accuracy of the figures and disclaims any liability resulting from any inaccuracy. Prices as at 11/07/2016. 5:00PM.

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