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The ASX200 came under renewed pressure on Monday only from a different sector this time as the miners were smacked in line with their underlying commodities e.g. iron ore plunged 11% at one stage yesterday taking Fortescue Metals (FMG) down -8.6% in sympathy. Over 55% of the main board’s stocks rallied over the day but when the heavyweight resource stocks fall ~5% it’s always going to be tough going for the broad market. It feels like different market pockets/sectors are taking it in turns to attract sellers’ attention almost like dominos falling one at a time:

  1. Tech stocks had been the focus of the seller’s attention over the last 6-months, as subscribers know we believe they’re now the prime group to bounce first.
  2. As inflation and interest rates bite on consumer confidence we’ve seen the related stocks become friendless i.e. people are expected to simply stop spending on discretionary items.
  3. On the 31st of May Goldman Sachs said the battery metals bull market was over until at least 2024, the leading names amongst this popular group have been subsequently hammered e.g. Allkem (AKE) has fallen over 30% in just 3 weeks.
  4. Earlier this month UBS downgraded Westpac (WBC) to neutral and it was enough to send the resilient Banking Sector tumbling e.g. WBC fell over 20% in the next fortnight.
  5. Energy stocks started falling last week after crude tumbled more than 12% over the 5-days e.g. Woodside Energy is already more than 15% below its June high.
  6. The miners have been falling for weeks but they accelerated lower yesterday and we will evaluate a few today as we question if we’re witnessing capitulation.

MM has been illustrating how cycles have been contracting since COVID and while we don’t believe its time to call the bottom for equities we do believe its time to start fading some of the more established moves of 2022:

  • MM believes that bond yields are close to peaking for at least the next few months as a potential recession takes centre stage over rising inflation and interest rates.
  • Hence tech and consumer-facing stocks should be ready for a period of outperformance – we actually believe it’s already started.

US stocks were closed overnight in celebration of Juneteenth Day (the end of slavery) but a strong recovery by European indices such as the UK FTSE which rallied +1.5% helped the S&P500 Futures bounce +1.1%, and the SPI Futures are calling the ASX200 to regain all of yesterdays losses early this morning.

MM is neutral to the ASX200 around the 6400 area
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