The ASX200 edged higher yesterday even as more stocks retreated under the weight of rising bond yields and nervous US futures – more on the former later. The local market experienced pronounced sector rotation throughout the day as bond markets heavily influenced investors, I have seen a few overnight moves akin to this in 2021 but arguably none as dramatic intra-day:
Winners: Banks and Resources opened middling to strong before gaining strength throughout the day to largely close on their highs – value stocks.
Losers: Tech and healthcare names opened firm only to drift all day ultimately closing near their lows – growth names.
The underlying index finished only 3.3% below its all-time high although it currently feels a little tired into any strength but the bulls shouldn’t throw in the towel just yet, remember the seasonality and statistics are both in your corner:
- Going back over 20-years, in years when the ASX rallies over 10% into September 75% of the time the strength is maintained with an average additional gain of over 6% when it performed i.e. the trends your friend potentially targeting the 7800 area.
- Historically the ASX likes Q4 with momentum usually picking up closer to Christmas, hence the phrase “Santa / Christmas Rally” – a time MM never advocates being short stocks.
Remember MM believes markets often trade with a reoccurring rhythm, at the moment we feel the current pullback by the ASX is very similar in both magnitude and now duration to the one in Q3/4 of last year, just before the market popped to the upside, lift-off could be approaching fast!
Overnight US stocks bounced led by the tech sector which shrugged off rising bond yields and embraced strong results from the likes of Netflix (NFLX US) and Tesla (TSLA US) , this morning the SPI Futures are calling the ASX to open down around 20-points surrendering yesterday’s gains in the process. Looking under the hood of US sectors we look poised to see a lethargic day with only some tech stocks potentially enjoying attention from buyers.
MM remains bullish the ASX targeting fresh highs in the weeks / months ahead
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